Standard & Poor’s decision to downgrade the U.S. debt rating on Friday for the first time in history was the subject of heavy debate on Monday, as officials from the ratings agency and several members of Congress made their way through the morning talk circuit. Some highlights:
John Chambers, chairman of S&P’s sovereign debt committee, told Fox News that the downgrade was the product of both politics and fiscal trajectory.
“Although the political settings in the United States are still strong, they’re not as strong as we had thought previously and compared to some other highly rated governments,” Chambers said. “President Obama characterized the political system as dysfunctional, and I think that’s a good word. We got to a position where we were within 10 hours of having a major cash-flow problem. This is not what happens in other countries.”
The second reason for the downgrade? “Right now, our debt-to-GDP has doubled since the Great Recession, which in and of itself is not a motivating factor,” Chambers said. “But we need to have a medium-term fiscal consolidation plan, I think, to keep confidence in the markets. And you need policymakers who can take a proactive stance to put the public finances on sustainable footing."
David Beers, head of S&P’s ratings unit, echoed Chambers in an appearance on ABC but took it a step further, suggesting that Treasury Secretary Timothy Geithner, who unabashedly criticized the downgrade, accidentally bolstered the decision Sunday on CNBC.ADVERTISEMENT
“He acknowledged the damage that was done to the U.S. reputation because of the controversy over the debt ceiling and the fact that it took to last Tuesday to get an agreement, the very day that the Treasury was warning it would have cash-flow difficulties and difficulty honoring its debt,” Beers said. “He also acknowledged that the underlying public finances of the U.S. government are on an unsustainable path.”
Beers added that S&P “absolutely” has no second thoughts about the downgrade, and is confident the agency’s track record “will go on remaining strong.”
Rep. Barney Frank, D-Mass., the senior Democrat on the House Financial Services Committee, blamed the downgrade on the United States’s “willingness to be the military policemen for the whole world.”
“There is one area in American policy where we are doing things disproportionate to the rest of the world,” Frank told CBS. “We don’t give our older people more medical care, we don’t have better retirement, we don’t spend more on the environment; where America is disproportionate is our willingness to be the military policemen for the whole world. We spend far more on the military than just about any nation except Israel.”
Rep. Allen West, R-Fla., a tea party favorite, told Fox News that Americans shouldn’t be looking to blame anyone – but if they were going to, it should be the Democrats.
“I think what you continue to see from the left is that they’re looking for someone to blame,” West said, referring to several Democrats’ remarks that S&P’s decision was actually a “tea party downgrade.” “It’s very simple: When we go back to 2007, when the Democrats took over the House and Senate, the debt at that time was $8.6 trillion, and now today we see the debt at $14.5 trillion.
“They have to look at themselves and understand that they are the ones that are totally to blame,” he continued. “It has nothing to do with increasing revenues by tax hikes; it has everything to do with cuts in spending.”