In the coming days we’ll sort through the repercussions of S&P’s downgrade of our credit rating, including concerns about the impact a potential interest rate increase would have on our ability to service our suffocating $14.5 trillion debt.
I’m surprised that so many people seem surprised by S&P’s decision. Weren’t people paying attention over the last year or so when we were getting warning after warning from various credit rating agencies that this was coming? I’ve been writing and speaking about it myself for quite some time.
Back in December 2010, I wrote: “If the European debt crisis teaches us anything, it’s that tomorrow always comes. Sooner or later, the markets will expect us to settle the bill for the enormous Obama-Pelosi-Reid spending binge. We’ve already been warned by the credit ratings agency Moody’s that unless we get serious about reducing our deficit, we may face a downgrade of our credit rating.” And again in January, in response to President Obama’s State of the Union address I wrote: “With credit ratings agency Moody’s warning us that the federal government must reverse the rapid growth of national debt or face losing our triple-A rating, keep in mind that a nation doesn’t look so ‘great’ when its credit rating is in tatters.”
One doesn’t need a Harvard Law degree to figure this out! Just look across the pond at Europe. European nations with less debt and smaller deficits than ours and with real “austerity” plans in place to deal with them have had their ratings downgraded. By what magical thinking did we figure we could run up perpetual trillion dollar deficits and still somehow avoid the unforgiving mathematics of a downgrade? Nothing is ever “too big to fail.” And there’s no such thing as a free lunch. Didn’t we all learn that in our micro and macro econ classes? I did at the University of Idaho. How could Obama skip through Columbia and Harvard without learning that?
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