While continuing to cast doubt on the credibility of Standard & Poor’s, several Democrats on Sunday said there is an even greater culprit in the downgrade of the nation’s credit rating: the tea party.
“I believe this is, without question, the tea party downgrade,” Sen. John F. Kerry, Massachusetts Democrat, said on NBC’s “Meet the Press” on Sunday, a day that also saw mounting anxieties in world markets over the downgrade among myriad other economic woes worldwide. Some of the world’s top financial ministers issued a joint statement Sunday night committing themselves to preserve the stability of financial markets and their economies.
David Axelrod, a former senior adviser to President Obama, used the exact same phrase in dubbing the credit rating drop the “tea party downgrade,” as Democrats tried to position themselves as reasonable, pragmatic leaders and conservative Republicans as irresponsible ideologues who caused the downgrade by refusing to accept any new taxes.
That’s exactly the kind of blame game that led Standard & Poor’s, one of three key credit-ratings agencies, to strip the U.S. federal government of its AAA status Friday night and reducing it to AA+ for the first time in the nation’s history.
“Congress and the administration are jointly responsible for the conduct of fiscal policy. So, this is not really about either political party,” David Beers, the head of S&P’s government debt-rating unit, said during an appearance on “Fox News Sunday.”
In justifying its actions, S&P cited the political gridlock that continues to paralyze Washington. Although Democrats and Republicans eventually came together last week and crafted a compromise bill to raise the nation’s debt ceiling, S&P decided it wasn’t enough to save the nation’s AAA status, a rating still held by France, Sweden and other countries, and businesses such as Coca-Cola Co. and Microsoft Corp.
“Even with the agreement of Congress and the administration this past week … the underlying debt burden of the U.S. government is rising and will continue to do so most likely over the next decade,” Mr. Beers said.
Sen. Lindsey Graham, South Carolina Republican, defended the tea party and said that without the movement, trillions of dollars in spending cuts wouldn’t be possible.
“Thank God they’re here,” he said on CBS’ “Face the Nation.”
“This is the first time we’ve ever raised the debt ceiling where we tried to actually reduce spending. That’s a good thing, but we’re woefully short,” he said. “The tea party hasn’t destroyed Washington. Washington was destroyed before the tea party got here. The hope is that the tea party and middle-of-the-road people can find common ground to turn this country around before we become Greece.”
Democrats, who also had harsh words for S&P, said there’s enough blame to go around.
Lawrence H. Summers, former director of Mr. Obama’s National Economic Council, on Sunday called the agency’s track record “terrible.” He referenced S&P’s highly positive ratings for mortgage-backed securities that tanked in 2008, which many blame for the ongoing economic crisis.
Treasury Secretary Timothy F. Geithner, in his first public comments on the credit downgrade, told CNBC that S&P had shown “terrible judgment.”
“They’ve handled themselves very poorly. And they’ve shown a stunning lack of knowledge about the basic U.S. fiscal budget math,” he said.
Democrats weren’t alone in their stinging critiques of S&P. Speaking on CNN’s “State of the Union,” Steve Forbes, former Republican presidential candidate and CEO of Forbes Inc., said the downgrade was “outrageous” and “a political move.”
“I’m surprised S&P would play politics. The U.S. government can pay the interest and principal on the bonds,” he added.
S&P also has come under fire for a $2 trillion error in its calculations of projected U.S. debt, which the agency later corrected. Democrats noted that Moody’s Investors Service and Fitch Ratings, the other two major ratings agencies, haven’t stripped the U.S. of its AAA status.
“They made a $2 trillion mistake. The other ratings agencies did not downgrade the U.S. debt because they did not make that $2 trillion mistake,” Maryland Gov. Martin O’Malley, a Democrat, said during an interview on ABC’s “This Week.”
Despite the initial error, S&P’s broader analysis hasn’t changed, Mr. Beers said. The agency also warned of another downgrade if Congress and the administration can’t get a handle on the mounting national debt.
Also speaking on “This Week,” S&P Managing Director John Chambers said there is “at least 1 in 3 chance” that the credit rating could be lowered further in the next six to 24 months.
While Republicans see the threat of another downgrade as evidence that the federal government must reduce spending drastically, some Democrats see the move as justification for tax increases.
“Look, I think this Standard & Poor’s downgrade is a good thing, because I think it underlines the fact that you can’t [tackle the national debt] without raising revenues,” former Vermont Gov. Howard Dean, who ran for president in 2004 and later led the Democratic National Committee, said on CBS’ “Face the Nation.”
“The vast majority of the American people want us to raise revenues, particularly on all those gazillionaires that Republicans’ tax cuts mostly benefit,” Mr. Dean said. “So let’s do the right thing. Let’s everybody put something into the pot.”
Mr. Dean also took shots at the tea party, saying the activists’ conduct during the debt ceiling debate proves “they’ve been smoking some of that tea, not just drinking it.”
The nation’s best chance to avoid further downgrade may lie with a so-called “supercommittee” to be formed as part of the debt ceiling deal Mr. Obama struck with Republicans last week.
The 12 members of that committee must be named by Aug. 16, and there has been widespread speculation that Rep. Paul Ryan of Wisconsin, architect of the 2012 Republican budget, will be chosen. But Mr. Ryan on Sunday poured cold water on the notion that the supercommittee will come to the rescue.
“I wouldn’t call it super. … I’m not putting all my stock in this committee,” he said on “Fox News Sunday.”
“I don’t think it’s going to be what fixes all of our fiscal problems. … Ultimately, I really think you need to change leadership in Washington if you want to fix this problem,” he added.
At best, Mr. Ryan said, the “supercommittee” will identify $1 trillion to $2 trillion in additional cuts, far below the $4 trillion threshold S&P cited as necessary to put the nation back on firmer financial footing.
Mr. Ryan also is an example of how jockeying for partisan advantage affects the nation’s finances.
When he proposed a long-term budget this year, Democrats immediately pounced on the fact that it scaled back Medicare spending in later years. One commercial by the liberal Agenda Project told viewers to “ask Paul Ryan and his friends in Congress” to explain grandmothers in wheelchairs being pushed off cliffs.
On Sunday’s talk shows, Mr. Dean reiterated that Democratic line in the sand, and did so immediately after having said “everybody” needed to sacrifice.
“There’s some things you can’t put into the pot. If Medicare eligibility goes up to 67, you’re going to see people running against Democrats in primaries. You know, we’re not going to penalize old people,” he said.