Monday, August 8, 2011

AA rating sounds like an honest assessment to me

Many people are upset at S&P for downgrading the U.S. to AA from AAA ratings.  I think that is just a case of shooting the messenger.  The U.S. is borrowing over 40 cents on each dollar it spends.  This is not the actions of a country that should be considered a AAA rated country, as far as I can tell.  

Those opposed to the downgrade, mostly on the political left of the isle, cite S&P's bad record during the housing bubble meltdown of the financial industry as reason to discount this new rating of the U.S.  But, it seems to me that the criticism of S&P in the past was that they did not downgrade financial institutions when they should have.  Now, they are downgrading a rating when they should.  Looks like an honest appraisal to me.

This should be a wake up call to the ideologues in Washington, on both sides of the isle, that they must reduce the deficit.  That means tax reform that raises revenues (in a way that also stimulates the economy by lowering tax rates) and cuts spending (cut the real spending of entitlements).  Entitlements are the third rail for Democrats, and raising taxes is the third rail for Republicans.  But they must do their actual job, governing the nation, rather than just do their political job, which is to get re-elected.  What value are they to anyone if they don't do their job?