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  • S & P Downgrade: Thank the Tea Party: Blame Everyone Else

    These wound are self-inflicted, and American leaders and their citizens don’t seem to get that.

    Now we have the consequences of the Tea Party’s scorched earth policy. They made government not only look dysfunctional: they made it look insane, and now Standard & Poor’s is punishing U.S. credit for what didn’t happen during the debt ceiling debate.

    I blame everyone involved for this fiasco, especially President Obama, because he was such an unimpressive negotiator – one who genuflected without reason or need, and he emboldened both the Tea Party and Republicans to use and succeed with a strategy that some say, was about purity, while others say it was about being crazy – they both could be right. I also blame Obama, because he would have never made a deal with no compromise if he was already into his second term – this was about the 2012 election and nothing else – and now the consequences of such shortsighted, self-serving measures – might make it that much harder for the U.S. economy to be revived.

    The Democrats deserve blame for not having a plan, for not really considering one, until they were way down the line, and the Tea Party, realized that the Democrat’s malfeasance, was their opportunity. Because the Democrats had no plan, they could only react and they could not take a hardline or offer a calculated response, because they had no plan of their own: they could not even leverage the higher ground, which they owned due to the country trending toward compromise, but because they had not done the due-diligence — they had no sword in the fight: it looked like absent leadership, which it was.

    So after the theater of the debt ceiling debacle, Standard & Poor’s comes along and makes a political assumption, rather than a financial one, to downgrade U.S. credit rating from AAA to AA+: a score that ranks behind twelve other countries. This is the same Standard & Poor’s that had triple AAA ratings for AIG and other financial firms, as they were drowning in Collaterized Debt Obligations (CDO’s), which got us into this mess in the first place. They missed the opportunity to do the job they were supposed to do, and now they are making political assumptions, which is not their job at all: nothing here is perfect – most of it is not even reasonable.

    What does it affect: Standard & Poor’s might affect the interests rates on America’s borrowing power, which has implications on business loans, housing loans, credit cards and all other items financed by credit, so main street gets its piece of the pain as well. Also, if interests rates go higher,  the U.S. government has less money to put back into the country (entitlement programs, infrastructure, innovation etc.), because they will need more money to pay off their loans.

    The connotations of the Standard & Poor’s move, which I think was to force the U.S. to come up with a wise and executable debt plan, was noble, but not really their job, nor do I think they forecasted the future corollaries of this consequence, and the reverberations it would have on already fragile markets, especially in Europe.

    This is my opinion alone, but I also think that Standard & Poor’s did this out of their own interests, because they will get a lot of play out of this decision – they will be in the news, and now they will need to be cajoled and feted – so there is the potential for much more power, promotion and revenue for Standard & Poor’s, which I think illustrates that this might be a more opportunistic measure, than a logical one.

    But like all else crumbling within the American idea these days: it’s not as if we are under attack – these wounds are self-inflicted, and American leaders and their citizens don’t seem to get that.

    Good Luck.

    Calvin Wilson
    Founder and CEO
    Upstart: Business and Management for 20-40 Year Old Professionals

    Filed Under: Gamechangers


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