Downgraded US Credit Rating: What comes of Coddling the Super-Rich

[Donnachaidh]

http://www.juancole.com/2011/08/downgraded-us-credit-rating-what-comes-of-coddling-the-super-rich.html


Downgraded US Credit Rating: What comes of Coddling the Super-Rich

Posted on 08/06/2011 by Juan

The decision of Standard & Poor to downgrade the credit rating of the United States of America from AAA to AA+ was clearly based on uncertainty in two major areas. The first and least important was the wrangling on the debt ceiling, which took the US to the brink of not being able to meet its debt servicing obligations for as long as the impasse lasted. The second was the increasing refusal of the American business classes to pay their fair share of taxes.

If a couple borrowed a big sum from the bank and had debt servicing obligations of say $10,000 a month, and they were repeatedly late and had a series of big shouting matches in the bank lobby about whether they might not just skip this month’s payment, then the next time they went to that bank for a loan, it would be declined or higher interest would be demanded, since they were clearly acting as though they were a bad bet for the loan officers. Getting a loan has in part to do with reputation, and with the lender’s expectation of being paid back with interest regularly and without delay. When you delay making a payment, you are in essence costing the lender money. If the lender has lots of people asking for loans, why would she make one to the couple that seems flaky?

So the first reason for the downgrade was the irresponsible and flaky behavior of the Tea Party, which created an artificial crisis for the benefit of its Koch Brother patrons, so as to throw more government resources at the super-rich and fewer at ordinary people.

The second reason for the downgrade was Dick Cheney’s insistence on deep tax breaks for the ultra-wealthy, and the Republican Party’s refusal to revise them. Obama wanted to raise taxes on the multi-millionaires and billionaires, but didn’t have the votes in the Senate to do so, and the Republicans threatened to take the welfare of ordinary people hostage (as they just did with the debt ceiling mafiosi tactics). I thought at the time that Obama should have dug in his heels and just called the Republican bluff, since it was clear that they would use those tactics on him at some point anyway.

More at the link --

[Cool Logic]

1. Ultimately, the reason for the downgrade can be found in the shovel wielded by our government.

For a country that continues to dig, when all of signals say stop, is not a good investment.