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Monday, August 08, 2011

Obama Owns The Credit Downgrade

Some back and forth between political parties on a nifty nick name for the recent downgrade of America's credit rating from AAA to AA+, with Liberals calling it the "Tea Party Downgrade" and Conservatives calling it the "Obama Downgrade".

Considering the S&P is threatening yet another downgrade if "government fails to make the cuts outlined in the debt ceiling agreement," it is pretty clear that according to the credit agency the U.S. Government spends too much and needs to cut the deficit.

Correct me if I am wrong, but Tea Party members and conservative Republicans have been harping, very publicly about spending cuts and deficit reduction since before the midterm elections.


Representative Blake Farenthold, a freshman Republican from Texas, said the S.&P. report could have a beneficial effect. “Anything that encourages the new committee to get the job done and get us back on a rational fiscal path is a good thing,” Mr. Farenthold said.

Another freshman Republican, Representative Steve Southerland II of Florida, said the credit report created “a sense of urgency for the two parties to come together.” The possibility of a further downgrade “scares me,” Mr. Southerland said.

The stated goal of the new panel, the Joint Select Committee on Deficit Reduction, is to cut federal budget deficits by a total of “at least $1.5 trillion” over the next decade.

The first round of savings under the new law, coming from annual caps on appropriations, is estimated at $917 billion over 10 years. Standard & Poor’s had said it was hoping to see $4 trillion in total deficit reduction. If the joint committee wanted to reach that goal, it might seek a bigger, more comprehensive deal, aiming to save $3 trillion rather than $1.5 trillion over 10 years.

If Congress wants to satisfy the rating agencies — Moody’s and Fitch have so far kept their AAA ratings of government debt — it will need to lock in substantial deficit-reduction measures, without using the kind of budgetary gimmicks that sometimes appear to produce savings under accounting rules prescribed by Congress, several lawmakers said.

According to The Daily Caller, Let Freedom Ring executive director Alex Cortes has launched a site called

Let Freedom Ring executive director Alex Cortes said the reason his organization launched is to point out how it’s largely the president’s fault for the credit downgrade. Like Kibbe, Cortes says both political parties are responsible for overspending through the years. But, he argued, Republicans are the “only ones” who have put “serious reforms” on the table in recent months.

Cortes said he thinks Cut, Cap and Balance — which passed the House due to Republican support — was the only plan put forth that fit Standard & Poor’s criteria for averting a downgrade. He also argued that entitlement reform was essential in order to prevent future downgrades.

“It’s because of the tea party that we got any cuts whatsoever,” Cortes told TheDC. “The president requested a clean debt ceiling increase with no spending cuts or reforms. I think it’s clearly Obama’s downgrade and that’s what our campaign says.”

No one doubts that Obama inherited an economic problem when he took office, but after 2 1/2 years into his presidency, with the first 2 years being helped by a Democratically controlled House and Senate, spending has increased, the deficit has increased and now America's credit rating has been downgraded.

There is no doubt that Obama owns this downgrade and no nifty shifting of blame to the Tea Party is going to divert the American public into forgetting who has been fighting against spending cuts and deficit reductions and who has been fighting for them.

[Update] Powerline takes a walk down memory lane:

Let’s take a walk down memory lane. What did the Democrats do with respect to federal debt during the four years they controlled both Houses of Congress? Here is a summary of the deficits the Democrats racked up during that time:

FY 2008 — $460 billion
FY 2009 — $1,410 billion ($1.4 trillion)
FY 2010 — $1,300 billion ($1.3 trillion)
FY 2011 — $1,600 (estimated) ($1.6 trillion)

Of the $14.5 trillion national debt, nearly $4.8 trillion–one-third of the total–was incurred during that four-year period when the Congress was exclusively controlled by the Democrats. Moreover, and equally important, during that time the Democrats did nothing to assure the markets that they have a long-term plan to deal with the country’s burgeoning debt. On the contrary, for more than two years the Congressional Democrats have refused to adopt or even to propose a budget! If you are looking for the reason why rating agencies have lost faith in the ability of our government to get its spending and debt under control, you need look no farther.

(Cartoon above Henry Payne via Townhall)