U.S. Credit Downgrade:Another Obama First!

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
,“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
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
. 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….



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