Standard and Poor’s US Downgrade Shock Doctrine; Lather, Rinse, Repeat
The ratings agency Standard and Poor’s is threatening another downgrade of the United States credit rating if the Super Committee doesn’t get results. From Bloomberg:
“If there were another downgrade, it would probably be because something has happened with the budget control act, that it has somehow been watered down” or “the fiscal committee doesn’t deliver the goods,” [John] Chambers [managing director of S&P] said. “Hopefully things turn around” and fiscal restraint “would enable us to see the ratings stabilize.” […]
“We have a negative outlook on the rating,” Chambers, chairman of S&P’s sovereign-debt rating committee, said today at the Bloomberg Markets 50 Summit in New York, tied to the magazine’s ranking of the 50 most influential leaders in global markets, finance, business and government. “An outlook says there is at least a one in three chance of a lowering of the rating over a six to 24 month time frame.”
This is the shampoo of shock doctrine; lather, rinse and repeat.
Whenever it looks like a deal could be reached that would reduce the deficit, mainly by cutting programs that help regular Americans, Standard and Poor’s issues a downgrade threat, giving members of Congress an excuse for supporting these unpopular cuts. We saw it with the Catfood Commission, during the Obama-Boehner attempt at a grand bargain, and now we are a seeing it with the Super Congress.
Amazingly, when there actually is an opportunity to radically reduce the deficit (the President could simply veto any extension of the Bush tax cuts or end our expensive wars), Standard and Poor’s is silent.
Of course this behavior would only seem strange if you thought S&P cared about the deficit instead of pushing a political agenda. By ignoring their own $2 trillion dollar math error, though, S&P made it clear to everyone they don’t really care about the actual numbers.