The Standard & Poor’s Downgrade and the TEA Party
by Rudy Cajka on August 10, 2011 at 9:32 AM
This past week we have seen a confluence of some of the most astonishing financial events in our lifetime. It started with the last minute debt ceiling deal that pleased no one and did little or nothing to reduce the nation’s enormous debt problems. This was followed by a large downdraft in the stock market, which was, in turn, followed by very bad news from Europe. As the week ended, the Italian debt problems became very severe and then on Friday evening, a major announcement from Standard & Poor’s (S&P) told the world that the debt rating for U.S. Bonds was being downgraded to AA+.
These events taken together, along with a general consensus that the world’s economy is slowing rapidly, resulted in massive losses on the world’s major stock markets. In the USA on Monday, Aug. 8, the DOW Jones Index lost over 634 points, one of the worst days in history for the US markets. Even greater losses were seen in Hong Kong, South Korea and Australia leading many to believe that the United States and the world were headed for another severe recession.
With all of this turmoil happening, one might have expected to hear a few reassuring words from the leader of the world’s leading economic power. However, Barack Obama had much better things to do. He had a weekend vacation planned for Camp David, which he took without uttering a word about the developing financial crisis. Finally, on Monday after the DOW had dropped by 400 points, he proceeded to the White House lectern to give another tele-prompted speech. Instead of reassuring the country and the world that his Administration and the Federal Reserve were hard at work attempting to correct the country’s financial problems, Obama proceeded to blame everyone but himself for all of the troubles. With the teleprompter loaded with 1531 words, here are some of Obama’s gems from his speech on Monday (paraphrased and shortened with my comments added):
- We received a downgrade, not because we are a lousy credit risk, but because our politics are gridlocked. (If only those recalcitrant Republicans would just fall into line.)
- The markets really believe our credit status is AAA because Warren Buffett said so. I and most of the world’s investors agree. (Really? Is that why stock markets have crashed all over the world?)
- We didn’t need a rating agency to tell us we need a balanced, long term approach to deficit reduction. (No? Who else would you listen to?)
- We didn’t need a rating agency to tell us that Washington gridlock is not good. (No. The world’s markets are doing that job quite well.)
- We knew that a prolonged debate over the debt ceiling could do enormous damage. (Really? Then why did you prolong it?)
- The economic disruptions in Europe, Japan and the Middle East has dampened consumer confidence and slowed the recovery. (It’s not my fault.)
- We know what to do. Our challenge is the need to tackle our deficits long term. (Really? So where’s your plan?)
- Last week, we reached an agreement to make historic cuts to defense and domestic spending. (Nonsense, we reached no such agreement.)
- We need tax reform and will ask those who can afford it to pay their fair share. (You mean the 1% of taxpayers who pay 39% of all income taxes should be paying much more?)
- What we need is compromise (Yes, let’s raise taxes and increase the size of government.)
- It’s the insistence on drawing lines in the sand – that’s what we need to change (It’s those intransigent TEA Party people and their ridiculous notion that the government needs to reduce its spending.)
- I intend to present my own plans over the coming weeks (Don’t hold your breath.)
- The good news is that by coming together to deal with the long term debt challenge, we have more room to implement proposals to get the economy moving faster (Really? We have come together?)
- If Congress fails to extend the payroll tax cut... (It’s their fault.)
- We should also help companies that want to repair our roads and bridges and airports. (Sure. We have plenty of money for that.)
- There will always be economic factors that we can’t control –- earthquakes, spikes in oil prices, slowdowns in other parts of the world. (That’s the problem. It’s not my fault).
- No matter what some agency may say, we’ve always been and always will be a AAA country (Don’t blame me. What do these guys know anyway?)
The speech ended with some appropriate comments about the 31 soldiers and Navy seals lost in battle in Afghanistan, which needed to be said. After Obama’s speech was concluded, the DOW Jones index proceeded to shed another 200 points, ending the day down 634 points, the 6th worst day ever on Wall Street.
The TEA Party’s Role in the Standard & Poor’s Downgrade
Prior to Obama’s speech, the liberal media has been giving administration and Obama campaign spokesmen plenty of time and ink to express their displeasure with the TEA Party. We have been hearing terms like a “TEA Party Downgrade” and how the TEA Party has held the U.S. Government “hostage”. These absurd comments from the likes of Sen. John Kerry, Howard Dean and David Axelrod are clearly intended to divert attention from the massive incompetence shown by the Obama administration and President Obama himself.
Has anyone in the liberal media asked what would have happened if we had no TEA Party and had a House of Representatives full of liberal Democrats? The answer to that is simple. There would have been a “clean” debt ceiling bill passed, with an enormous increase in the debt ceiling and zero spending cuts, further putting the USA on a path to bankruptcy. It would seem that anyone who has any influence in slowing down government spending by even the smallest amount is referred to as a terrorist or a hostage taker.
The TEA Party has been instrumental in the United States in changing the entire dialog about government spending. Instead of talking about how much more big government spending we should be doing, as Obama did in his original proposed budget for fiscal 2012 and his State of the Union speech, the whole conversation has changed now to how much the government should cut. With a $14.5 Trillion debt, that is a good thing.
Without the TEA Party to help bring at least some cuts into the current period of high deficit spending, just how long does anybody think that the rating agencies would have waited to lower the U.S. credit ratings? S&P has been discussing this subject with the administration for many months now, as has Moody’s. Also, Moody’s has now warned that it may lower U.S. government debt plus 7,000 municipals — including five of the 15 states it currently ranks triple-A. The S&P downgrade of U.S. debt is just the first. Yesterday, the firm also cut Fannie Mae and Freddie Mac. It’s probably true that the political deadlock resulted in a downgrade now, rather than later, but it was inevitable that it would have happened. S&P has telegraphed that there will be further downgrades, possibly within the next six months, if the government doesn’t make further cuts by the end of the year.
The TEA Party has done us all a big favor by bringing attention to the problem and changing the conversation completely from more spending to more saving. The idiots on the left like Sen. Kerry and Howard Dean are playing politics with a very critical problem for the USA. Millions of Americans have lost substantial amounts of money in their 401K’s, their college funds and their savings partly because of the incompetence of the Obama administration. All the liberal politicians and their benefactors in the liberal media are doing is trying to prop up the totally failed Obama administration and hoping to confuse things enough to allow Obama to hold on until the 2012 elections.
We must all keep up the pressure on the Obama administration and make sure that these liberal attacks are countered whenever they appear in the media. Make sure your friends, neighbors and family members know what the TEA Party’s position is and know how important it is for everyone to support the TEA Party in its twin goals of setting this nation on a correct fiscal course and in electing real conservative Republicans to Congress and the Presidency in 2012.