There’s a scene in the first “Star Wars” with Luke, Leia, Han and Chewey in a trash compactor. Luke says “It could be worse.” something growls and Han says, “It’s worse.”
Standard & Poor’s announced Friday night that it has downgraded the U.S. credit rating for the first time, dealing a symbolic blow to the world’s economic superpower in what was a sharply worded critique of the American political system.
Lowering the nation’s rating to one notch below AAA, the credit rating company said “political brinkmanship” in the debate over the debt had made the U.S. government’s ability to manage its finances “less stable, less effective and less predictable.” It said the bipartisan agreement reached this week to find at least $2.1 trillion in budget savings “fell short” of what was necessary to tame the nation’s debt over time and predicted that leaders would not be likely to achieve more savings in the future.
It doesn’t matter that S&P has been horribly wrong before. Consider: A ratings agency that gave a triple-A to completely worthless subprime mortgage fantasies is saying that the wealth of the United States is less credit worthy.
Paul Krugman has a few thoughts:
On one hand, there is a case to be made that the madness of the right has made America a fundamentally unsound nation. And yes, it is the madness of the right: if not for the extremism of anti-tax Republicans, we would have no trouble reaching an agreement that would ensure long-run solvency.
On the other hand, it’s hard to think of anyone less qualified to pass judgment on America than the rating agencies. The people who rated subprime-backed securities are now declaring that they are the judges of fiscal policy? Really?
Just to make it perfect, it turns out that S&P got the math wrong by $2 trillion, and after much discussion conceded the point — then went ahead with the downgrade.
But Atrios says it best:
Apparently we’re supposed to care about what some idiots at some corrupt organization think about anything.
It will be interesting to see what happens in the markets on Monday. Actually, we’ll get the first signs on Sunday night in the U.S. when Monday Asia trading opens. Ratings agencies Fitch and Moody’s have already affirmed a triple-A for America.
And since I enjoy beating dead horses: This is more proof that the posturing in Washinton was pointless. When the world is told by “very important people” that a deal had to be done to protect our credit rating, and the done deal results in a downgrade, it’s time to find new important people.