Ben Johnson,The White House Watch
Three years ago,many well-meaning Americans suspended concerns about Barack Obama’s experience,judgment,and associations in order to vote for an “historic”president. To paraphrase H.L. Mencken,they got one —good and hard. Friday night,for the first time in history,Standard &Poor’s downgraded the U.S. credit rating from AAA to AA+. The United States earned the top rating the moment such rankings began in 1917 —which means we maintained our AAA rating through the Great Depression,stagflation,malaise,and the 1982 recession. Thirty months of Barack Obama,and it is gone for the first time in history. Change we can believe in!
The retrogression is neither surprising nor is it the only “historic”first The One has perpetrated against the United States. Obama cajoled Congress for weeks that it had to pass a debt ceiling compromise by August 2 to avoid just this occasion. But as Rep. Tom McClintock,R-CA,pointed out,“The purported cuts,even if realized,are far below the $4 trillion deficit reduction that credit rating agencies have warned is necessary to preserve the Triple-A credit rating of the United States government.”S&P used precisely this language in its statement about downgrading the United States,saying the resultant cuts fall “short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade.”It faults political gridlock and the lack of “containment”of entitlements. The same administration experts who insisted GOP sellouts on the debt compromise would stave off Friday’s downgrade also insisted passing a stimulus plan would hold unemployment below eight percent.
Even less surprising is the fact that the Obama administration actually believed its rhetoric could stop the inevitable. When Standard &Poor’s began hinting at its actions,anonymous officials began a whisper campaign that the agency’s math was off. Jake Tapper reported Friday evening,“Because of the pushback,the Obama administration is preparing for the downgrade but is not 100% positive it’s going to happen,officials said. And if the downgrade does happen,officials are not sure when it will happen.”S&P downgraded the U.S. hours later. Choosing talk over action has consequences,at home and abroad.
The consequences of his actions are unknown and foreboding. The new credit rating may cause inflated interest rates to trickle down to states and localities,or make all borrowing rates rise.
Economic growth would shrink the importance of the national debt —but such growth is not expected as long as Obama is president. Economists expert growth in debt,and its attendant economic disintegration,in the years to come. Under most estimates,debt would amount to 88 percent of GDP in ten years. S&P warns under its pessimistic scenario,debt will reach 101 percent of GDP in 2021. (AFP news service reported on Wednesday,that U.S. borrowing topped 100 percent of GDP.) Carmen Reinhart of the Peterson Institute for International Economics testified before the House Budget Committee in March that growth begins to slow noticeably once debt crosses the 90 percent threshold. The European Central Bank suggested negative impacts begin at the 70-to-80 percent level. Even the adoption of the debt compromise spooked the stock market,causing a decline for nine out of the past ten sessions,a streak not seen since 1978 when Jimmy Carter was president.
The other two ratings agencies,Moody’s Investors Service and Fitch Ratings,are not likely to follow suit…at least,not yet. However,Moody’s has warned the ratio would have to come down to 73 percent by 2015 “to ensure that the long-run fiscal trajectory remains compatible with a AAA rating.”For its part,S&P warned “a higher public debt trajectory than we currently assume could lead us to lower the long-term rating again,”to AA,putting us on par with such economic powerhouses as Spain and Qatar.
You Wanted Obama to Make History? He Has
This slide toward mediocrity is only the latest of a string of historic firsts in Obama’s presidency. Yes,Obama was the first black president. He has been called the first….