S&P ARE IDIOTS
Seriously – why would anyone take the rating agencies seriously, after they consistently gave junk mortgage securities triple-A ratings?
After failing the world so egregiously – which gave us the mortgage derivatives fiasco that caused so much of this mess – they are now going to show how responsible they are by warning the world that U.S. debt obligations are not triple-A?
Oh, and by the way, they acknowledge making a $2 trillion error in their calculation, as explained here, but decided to go ahead with the downgrade anyway.
The idea of giving special NRSRO (Nationally Recognized Statistical Rating Organization) status to the rating agencies was not for them to opine on stuff the whole world has been watching on the nightly news for six months. That’s not why we need rating agencies.
Rather, the idea was for them to analyze the arcane stuff almost no one could bear to pay attention to – like collateralized debt obligations – to make assessments investors could rely on.
They failed so miserably that Janet Tavakoli last month made a serious recommendation to strip them of their special status: “Tavakoli Structured Finance Revokes the Credit Rating Agencies’ NRSRO Designation: Issues and Solutions for Restoring Credibility to the Credit Rating Agencies and Rehabilitating the Alternative Banking System.”
Of course, Janet has no authority to revoke their NRSRO designation. But after perusing her report, you will wish she did.
The U.S. is clearly not going to default on its debt, if only because our debt is denominated in dollars, and we can print dollars. (That makes for inflation risk, but no risk of default.)
The whole world seems to agree, or would not be piling into Treasuries at essentially no interest. Does the world really need the wisdom of S&P to form its judgment on this? S&P whose dereliction in rating the mortgage securities led to our financial crisis in the first place?
THE SILVER LINING
The first stimulus package, which the Republicans required be largely about tax cuts, was way too small. Why do we have so many construction workers idle when there is so much work to be done? Especially when – despite it all – Uncle Sam can borrow to fund these long-term investments at under 4% for 30 years?
The bottom line is that we need to raise taxes, especially on the wealthy, to help finance the added debt we need to assume in order to put millions to work revitalizing our infrastructure and achieving energy independence. This is a war we can win, a war that set us back on the path to prosperity, and a war that doesn’t blow things up.
And this bottom line is almost the exact opposite of the “unimaginably stupid” Republican priorities: (a) cutting back on government spending at exactly the time it is most needed; (b) keeping tax rates on the wealthy at historic lows at a time when we are running massive deficits.
Talking heads please note:
- Raising taxes in a weak economy does not kill jobs. Bill Clinton did it, and in the ensuing years of his presidency we created 23 million new jobs.
- Keeping taxes on the wealthy low does not create jobs. Sure the last 10 years have proved that.
- The tax on dividends and capital gains when Ronald Reagan left office was 28% – and he is the second greatest man who ever lived. So what is so sacred about today’s 15%?
The only way to get back on track, it seems, will be to vote the passionately misguided Tea Party folks out of office.
What we do in the meantime is harder to know. The silver lining is that last Thursday’s 512-point drop in the Dow and S&P’s downgrade just might put enough pressure on the Republicans to support actions that are not unimaginably stupid.
IF YOU SKIP THE ADS
Every so often, they’re worth watching. Like these, from Rachel Maddow at the Hoover dam and in a diner.
SIGN THE PLEDGE
Elliot Raphaelson: “I have written to the White House today, with the following suggestion. Perhaps you can ask your readers if they agree. I recommend the following: As part of the upcoming election campaign, the White House ads should ask the voters to ‘pledge’ not to vote for any politician willing to sign the Norquist pledge, since the only result is to destroy the middle class.”
☞ Leaving aside the unfortunate fact that most voters don’t know who Norquist is – maybe there’s a way this could work? Maybe leave Norquist out of it and just say we pledge not to vote for any candidate who pledges not to raise taxes on the wealthy? “Discuss.”
Quote of the Day
[It would be splendid if someday] economists could manage to get themselves thought of as humble, competent people, on a level with dentists.~John Maynard Keynes
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