Yesterday, S&P, the oh-so-accurate rating agency issued a warning on US debt. The warning states that there is a 30% chance that the US's AAA credit rating could be downgraded a notch in the next two years. Now, how they arrived at this percent is beyond me, and probably beyond them. Remember, this is the same agency that gave crap mortgage backed securities investment grade ratings, helping perpetuate the near-collapse of the financial system.
But still, if you are a deficit hawk, as I am, then a warning from the credit agency is welcome, and probably long overdue. It provides deficit hawks with another rallying cry when tackling tough budget negotiations. And is hopefully gives politicians less wiggle room to engage in partisan politics and to fight ideological budget battles.
The reality is that compromise will have to look something like this. The Republicans want to cut deep and the Democrats want to raise taxes and not cut so deep. We're going to need to combine both by cutting deep and raising taxes if we want to get the deficit monster back in the jar. So, you see, both sides can get what they want. It just takes a little compromise. Hopefully the S&P proved itself a little useful and helped prod this compromise forward.
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