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Standard & Poor’s, having been happy to grade junk real estate securities AAA, has now downgraded U.S. government debt from AAA to AA+. So perhaps this is a non-story, S&P having demonstrated beyond the shadow of a doubt that the standard of its debt-grading is poor.
Nonetheless, this downgrade marshals whatever credibility S&P has left to push forward the long-term agenda of capital: the degradation
and ultimately the elimination of every form of collective insurance of
the standard of living of the working class. Standard and Poor’s press release doesn’t even try to hide its agenda
We have lowered our long-term sovereign credit rating on the United
States of America to ‘AA+’ from ‘AAA’ and affirmed the ‘A-1+’ short-term rating.
>…
>The outlook on the long-term rating is negative. We could lower the
long-term rating to ‘AA’ within the next two years if we see that less
reduction in spending than agreed to, higher interest rates, or new
fiscal pressures during the period result in a higher general government debt trajectory than we currently assume in our base case.
>…
>Republicans and Democrats have only been able to agree to relatively
modest savings on discretionary spending while delegating to the Select
Committee decisions on more comprehensive measures. It appears that for
now, new revenues have dropped down on the menu of policy options. In
addition, the plan envisions only minor policy changes on Medicare and
little change in other entitlements, the containment of which we and
most other independent observers regard as key to long-term fiscal
sustainability.
So there you go - S&P has painted a big target on the back of
Medicare and Social Security (euphemistically referred to here as “other entitlements”). If the U.S. guts Social Security and Medicare, S&P may let us keep our current AA+ rating. Fail to thrown grandpa and
grandma under the bus, and the credit rating may go down yet again, to
AA.
How seriously should we regard S&P’s warnings about the long-term fiscal instability of U.S. public finances? The Wall Street Journal - the jewel in the Murdoch crown - gives us the answer: The unprecedented move came after several hours of high-stakes drama. It began in the morning, when word leaked that a downgrade was imminent and stocks tumbled sharply. Around 1:30 p.m., S&P officials notified the Treasury Department they planned to downgrade U.S. debt, and presented the government with their findings. But Treasury officials noticed a $2 trillion error in S&P’s math that delayed an announcement for several hours. S&P officials decided to move ahead anyway, and after 8 p.m. they made their downgrade official. What, after all, is a minor $2 trillion calculation error compared with the imperative to fuck over the working class?
It may turn out that S&P is a paper tiger. The downgrade of U.S. debt will matter only if financial markets respond by demanding higher interest rates on U.S. bonds. If they do, the long-term cost to the U.S. could run into trillions of dollars. If financial markets ignore the S&P downgrade, then its credibility as a rating agency, already severely shaken, will take another hit.
Whatever the effect of this downgrade, one has to ask: in what rational universe would a corrupt, mathematically-challenged, and class-bound organization like this continue to exist?