Standard & Poor’s downgraded the federal government’s credit rating just three days after President Barack Obama signed legislation lifting the limitation on borrowing. Isn’t this what the president warned us would happen if we didn’t raise the debt ceiling?
The credit-rating agency explained that “the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade.” S&P sees “America’s governance and policymaking becoming less stable, less effective, and less predictable.”
Put another way, S&P saw in the world’s oldest republic a resemblance to a banana republic. Americans used to bombastically chant “We’re number one.” Obama has reduced us to: “We’re not Greece.”
Far from the draconian cuts imagined by Democrats, S&P noted the legislation’s “relatively modest savings on discretionary spending,” that “Congress and the Administration could modify any agreement in the future,” and that the deal essentially punted on entitlements. “Our opinion is that elected officials remain wary of tackling the structural issues required to effectively address the rising U.S. public debt burden in a manner consistent with a ‘AAA’ rating,” Friday night’s bombshell report contended.
S&P didn’t drink Obama’s Kool Aid. He insisted that restraints on borrowing, rather than borrowing atop borrowing, would damage America’s credit. A credit downgrade means the cost of the federal government’s spending addiction has become costlier. But junkies gladly pay—especially when the money isn’t theirs.
The unprecedented credit downgrade alone makes these historically terrible days for the republic. But with Bad News Barry, the worst rapidly becomes merely “bad” as one travesty surpasses the last. Last week’s succession of horrible news demonstrates this.
Washington announced that consumer spending had declined .2 percent for June, the biggest drop in almost two years. GDP growth seems to be constantly revised downward, with the economy growing by .4 percent and 1.3 percent for 2011’s first two quarters. Unemployment scorns “hope” and “change” by stubbornly remaining above nine percent.
The stock market endured its worst week in almost three years. In one frightening fortnight, the Dow Jones lost ten percent of its value. That’s not a slump. That’s a correction. Who knows whether investor reactions to S&P’s downgrade will make it a bear market?
And last week, for the first time since the Second World War, the debt reached parity with the annual economic output. To loosely paraphrase the sharp-tongued Obamanista Christina Romer, “Fe’re wucked.”
Don’t blame the bad news on Bad News Barry. It’s not his fault. Even he says so.
In his weekly address delivered on Saturday, the president blamed our woes on “the Japanese earthquake and tsunami’s effect on supply chains,” “the Arab Spring’s effect on oil and gas prices,” and “the economic situation in Europe.” When it’s not the responsibility of his presidential predecessor, it’s the fault of his congressional adversaries. Blame corporations for hoarding money. Blame employers for not hiring. Blame the rich for not paying their “fair share.” Just don’t blame Obama.
Acknowledging mistakes is a necessary precursor to correcting them. People who don’t fess up to errors commit more of them. The irony here is that a thin-skinned president who has no capacity for self-criticism will wind up enduring more criticism because of his phobia of it. Hubris matters.
Fanaticism matters, too. The president’s supporters are so emotionally invested in his success that they appear unable to consider his central role in America’s failures. Obama has become so integral a part of their identities that conceding his errors becomes almost self-renunciation.
Because they don’t admit any mistakes, the arrogant president and his zealous followers cannot learn from them. With a little humility and moderation, they could glean many important lessons from this failed presidency.
Spending spreads existing money around; it doesn’t grow the economy. Rewarding failure through bailouts and punishing success through taxation is a recipe for disaster. The growth of the government economy has come at the expense of the private economy. Regulatory micromanaging of business puts businesses out of business. Creditors notice when you incontinently spend money you don’t have.
We can’t hope for the president to change. We can hope to change the president.