The joy ride is coming to an end for Capitol Hill as Standard & Poor’s (S&P) justifiably lowered the United States’ credit rating for the first time in history due to budgetary and political concerns over the debt deal, setting the nation back with a big fat metaphorical flat-tire.
S&P lowered the United States’ credit rating from AAA to AA+ last week, sending a wake-up call to Washington over its less than satisfactory political standoff, which led up to the unexceptional budget deal.
Citing the “political brinksmanship” of the last few months over the debt deal, S&P struck a resonating note of dissatisfaction with the partisan politics in the Capitol, which has made our government less stable.
Rather than reaching substantial compromise, both Republicans and Democrats have failed to appropriately address the budget debacle, with Republicans using the issue as leverage to advance their party standing instead of striving to benefit the nation as a whole and Democrats failing to find common ground.
Our political leadership needs to better recognize the danger they are putting our country in and, with the world’s largest economy, everyone else.
Still, politicians on either side of party lines have continued to contribute to a persistent theme of bitter rhetoric. Democratic Senator John Kerry has labeled the credit rating drop a “Tea Party downgrade” while two of the GOP presidential hopefuls, Michele Bachmann and Tim Pawlenty, quickly criticized President Obama as unfit for re-election in light of the dilemma.
The credit rating drop also played a critical role in setting off the biggest stock market plunge since 2008, according to The New York Times. Amid concerns over the European Union’s own budget crisis and the United States’ negative impact on Asian markets, the next few weeks look to be particularly worrisome for the financial sector.
Equally disturbing, if the folks in Washington D.C. cannot get their act together, California students may find themselves stuck in a tighter budgetary squeeze than they already are with the current increase in CSU tuition fees.
While S&P was markedly unreliable in the lead-up to the previous financial meltdown and subsequent recession by continuing to give AAA ratings to institutions that were in serious trouble, they have made a legitimate challenge to the direction the new budget deal is taking the United States.
Despite facing harsh criticism from the White House, S&P made the right decision.
S&P ascribed the credit downgrade to a lack of structural adjustment to the fiscal budget in the deal that would include revenue-generating mechanisms to reduce the deficit. While the approved bill did lay the responsibility on a bipartisan committee to come up with solutions by November, the bill itself seems to be a band-aid fix.
The United States government needs to enact stronger changes to the fiscal budget rather than playing out the usual political games, and leadership in the Capitol must examine where their true loyalties lie before real progress can be had.
If things don’t change in Washington and the joy ride continues on a flat-tire, then the United States will get way more than metaphorical damage with a further downgrade to a rating of AA by S&P, potentially besetting the world economy with even greater financial woes.
