All of that said, there a sliver of a silver lining — and an important one. America’s downgrade may serve as a wakeup call for its policymakers. It is an unambiguous and loud signal of the country’s eroding economic strength and global standing. It renders urgent the need to regain the initiative through better economic policymaking and more coherent governance.

There is a risk, of course, that different political factions will use S&P’s action as a vindication of their prior beliefs. Democrats would argue that it is recent Republican political sabotage that pushed S&P over the edge while Republicans would argue that we are here due to irresponsible government spending by the Democrats.

For the sake of their country and the wider global economy, both parties should resist the urge to begin bickering. Instead they should seize this potential “Sputnik Moment” — a visible shock to the national psyche that can unify Americans around a common vision and a renewed sense of purpose — that of halting gradual secular decline by putting the country back on the path of high growth, job creation and financial soundness.

This I believe to be true. Our side can say the future now holds revenue increases but I will believe it when I see it. We need to start declaring first principles that we will not violate and then sticking to those principles in all these "negotiations."

If the Republicans can declare no higher taxes and stick to it, surely we can find some lines we will not cross, some principles we will not barter, some citizens we will not throw under the bus for expediency.

Bill Maher had a good segment on this last night. He said the Dems need to have a subparty of total nutjobs who make ridiculous and unbending demands ("Tax the rich at 100 %!"). He suggested it be called the "Donner Party". While great comedy, there is a kernel of a good idea there. Much like we counter the birther nutjobs with mockery, countering the Tea Party with a bunch of intransigent left wingers may be the ultimate solution.

This credit rating downgrade was completely avoidable, at least in the short term. None of this had to happen.

The situation deriving from the "debt ceiling" debate that approached hysterics (and then actual crisis) in the past month was created primarily by the GOP in an effort to place the President in a specifically uncomfortable situation which they would then attempt to blame him for. Boehner and McConnell are primarily responsible, followed by several Tea Party congressmen that they could not account for or control when it came to votes. During G.W. Bush's presidency, since 2001, the debt ceiling was raised no less than EIGHT times, including twice in one year, without so much as a whisper in Congress that this simply HAD to be stopped. Since March 1962, the debt ceiling has been raised 74 times, according to the Congressional Research Service.

But wait, there's more! (TM) Ron Popeil
The GOP chose to play politics with this issue, crying in all directions how the spending simply had to stop (even though it's been helping to prop up the economy they weakened in the first place), but then ALSO refusing to even CONSIDER allowing the Bush tax cuts on the wealthy to expire. Those tax breaks, across the board, were NEVER meant to be anything more than temporary. Allowing them to expire would return our tax levels to that of the 1990's... which just happens to be the greatest period of economic growth this country has seen for the better part of a century.

Now, because the GOP decided to play chicken with the White House on an issue that never once held any prominence or urgency when their party controlled the White House, they have created an economic fiasco on a scale that has NEVER before been seen in this nation. Our proud country's credit is no longer considered top-notch, simply because the leadership in the GOP insist on a scorched earth policy as the only means they have to win back the White House in 2012. Problem is... there won't be much of an economy left to save, GOP win or not in 2012, if they don't get their heads out of their asses, right quick. America should never, EVER doubt what the GOP is trying to accomplish with these outrageous tactics in Congress, economic recovery or recession be damned... because they've already told us directly:

"The single most important thing we want to achieve is for President Obama to be a one-term president." - Senate Minority Leader Mitch McConnell (R-KY), in an interview with the National Journal, describing his goal in retaking the Senate.

But though I will take a lot of hell for saying this, I'm afraid I think that the lion's share of the blame goes to the GOP, which escalated to this completely unnecessary showdown, and then gave up any hope of a grand bargain because it would have required some revenue increases.

[snippety do daa]

I sympathize with the Tea Party's goals of smaller government. I even kind of understand what they thought they were trying to do. But it was an enormously counterproductive tactical mistake, and though of course I would say this, I believe it was made because everyone who tried to point this out was ignored . . . nay, not just ignored, but derided as a Beltway Insider Commiesymp.

In that political environment, hell, I'd downgrade us.

I'm sorry, but this was stupid. It hurt the country, and it hurt the party that staged the protest vote even more. All for very little gain.

[T]he US does not deserve a triple-A rating, and the reason has nothing whatsoever to do with its debt ratios. America’s ability to pay is neither here nor there: the problem is its willingness to pay. And there’s a serious constituency of powerful people in Congress who are perfectly willing and even eager to drive the US into default. The Tea Party is fully cognizant that it has been given a bazooka, and it’s just itching to pull the trigger. There’s no good reason to believe that won’t happen at some point.

[snip]

So by that measure they have to downgrade the US: the default concerns we saw during the debt-ceiling debate were real and can’t be ignored.

BROWN: And I think the only way out of that is going to be a very vigorous election, where people lay out the stark alternatives, not muffle it like politicians like to do, kind of, you know, smooth out the rough edges. I think we need a very clear, decisive election.

I would say that the Republicans are gearing up to destroy the president, that the president will have to respond in a very powerful way, and the result for the country could be calamitous.

CROWLEY: What does his response have to be? What is that powerful response?

BROWN: He has to be authentic. He has to be powerful. He has to lay out a clear alternative and run a risk that it may not work out for him, because the - society's in the mood where it wants a lot of things, but it's not willing to pay for them.

Jerry Brown did a good interview with Candy Crowley on CNN's State of the Union. Rush Transcript. Discussing his view that America is edging towards being ungovernable, this segment reminded me of what many have been saying on TFB:

"Republicans have an agenda: War. And Republicans want to fund this war, not by taxing high incomes but by cutting support programs for the down and out."

To be clear, there was never any risk whatsoever of US default as President Obama has power established by President George W. Bush’s Presidential Directive 51 to declare default a National Emergency and to set aside the debt ceiling limit and Congress’ power of the purse, and to continue to issue the debt necessary to fund the US government and its wars.

That the American press ever took this highly-hyped “crisis” seriously merely demonstrates their prostitute status.

And who is responsible for the introduction of this process ?

At least 50% (I'd say 80%) of our problems in California are due to the horrible Initiative process. If you can get it on the ballot and get it passed, you can call for the expenditure of elebenty billion dollars a year for, well, pretty much anything. And the best part is, you don't even have to say where the $$ come from! They just has to be spent, even if you don't have them!

Then there's the stupid gas tax/sales tax thing which they tried to fix but FUBARed.

we may need a list.

Zorba's asks, perhaps rhetorically, how the initiative process started. Ironically enough, this kind of direct democracy came about at the turn of the last century all over the US, not just in California, as a response to the lack of response from state governments to citizen demands. Then, just as now only worse, legislatures had been hijacked by millionaires - or maybe they were only thousandaires but in today's money would be millionaires - and corporations and they were killing citizens who protested work conditions, sanitary conditions, public corruption, you name it.

In California, it's been taken over by savvy politicians and consultants who know how to manipulate the language to confuse voters into voting against their best interests. Let's say Chevron wants to put drill rigs off the coast of Santa Barbara, in a place they've never been allowed before. The referendum writers would craft the initiate in such a way that if you vote NO, you don't want the rigs you have actually voted YES, bring 'em on. The public is getting wiser to the tricks, but for the low information voter who goes by what his friends are saying or the ads they see between quarters of football games, they confuse the issues enough.

I Heard It Through The Baseline

Oh, my. Treasury has a fact sheet explaining that $2 trillion error by S&P; it may sound technical, but to anyone who follows budget issues, it’s a doozy.

When the Congressional Budget Office “scores” policies, it does so relative to a “baseline” — a set of assumptions about what would happen in the absence of that policy. The normal CBO baseline — mandated by Congress — assumes that discretionary spending will rise with inflation, but no more. This isn’t realistic most of the time, since the demands for government services rise both with growing population and in many cases with rising economic activity; that’s one reason CBO always provides an “alternative fiscal scenario” that’s supposed to be more realistic. Under current conditions, however, with Obama already committed, even before the debt deal, to fairly harsh austerity, the zero-real-growth baseline is more realistic — and it’s how the debt deal was scored.

But S&P initially assumed that the debt deal was subtracting off a quite different baseline.

The point here is not so much the $2 trillion, which makes very little difference to real US fiscal prospects; it’s the fact that S&P stands revealed as not understanding basic analysis of budget estimates. I mean, I don’t think I would have made that mistake; real budget experts, like the people at the Center on Budget and Policy Priorities, certainly wouldn’t have.

So what we just saw was amateur hour. And these people are pronouncing on US credit-worthiness?

Better education is the only answer

Cantor urges GOP to resist tax hike pressure after S&P downgrade

House Majority Leader Eric Cantor (R-Va.) told Republican lawmakers to expect, and resist, increased pressure to raise taxes following the downgrade of the U.S. credit rating by Standard and Poor’s.

“Over the next several months, there will be tremendous pressure on Congress to prove that S&P’s analysis of the inability of the political parties to bridge our differences is wrong,” Cantor wrote in a memo Monday to House Republicans. “In short, there will be pressure to compromise on tax increases. We will be told that there is no other way forward. I respectfully disagree.”

Cantor’s letter is another sign that both political parties are retrenching in the wake of S&P’s decision to strip the U.S. of its AAA rating for the first time in history. Democrats have blamed Republicans and the Tea Party for manufacturing a debt crisis and walking away from the kind of bipartisan “grand bargain” that would have prevented the downgrade. The legislation Congress passed last week to avert a default contained just $900 billion in initial deficit reduction, much less than the $4 trillion President Obama had discussed with Speaker John Boehner (R-Ohio). ...

In a statement issued shortly after Cantor’s memo, Boehner reiterated the GOP’s opposition to tax increases.

“Providing economic certainty and creating an environment in which businesses can invest and jobs can flourish must remain our number-one focus. That’s why raising taxes is simply the wrong approach,” Boehner said.