From Buffett to Snoop: Top Ten Livid Reactions to the Downgrade

Krugman blames S&P, Bachmann blames Obama, and China blames us all

Despite chatter through all of Friday, it still took many by shock when S&P issued a press release with the official decision that the U.S. credit rating is now AA+, the first time in history that American government debt has not received its top rating of AAA. Many noted that a AAA rating is rare in business; only four U.S. companies have a higher rating than the U.S. now: Microsoft, Exxon Mobil, Johnson & Johnson, and Automatic Data Processing. But rare as a AAA is, this historic downgrade prompted severe reactions from just about everyone.

First, let's get the most serious out of the way and start with China. The New York Times reports that China is none too impressed with us and had some "harshly-worded" admonition. As the largest foreign holder of U.S. debt, just hours after S&P downgraded U.S. debt, it said that Washington needed to “cure its addiction to debts” and “live within its means.”

“The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone,” read the commentary, which was published in Chinese newspapers...

“International supervision over the issue of U.S. dollars should be introduced and a new stable and secured global reserve currency may also be an option to avert a catastrophe caused by any single country,” the Xinhua commentary said.

So... international supervision over the U.S. dollar. A new global reserve currency. "Painful facts." Time for something a bit more positive.

Warren Buffet told Fox Business News that S&P's downgrade "doesn't make sense" and he doesn't believe it.  He may not be the largest foreign holder of U.S. debt like China, but he said that Berkshire Hathaway has considerable Treasury Bill exposure. And he's still optimistic:

"I don't get it," Buffett told FBN late Friday night. In fact, Buffett reaffirmed his belief in the quality of the United States' credit telling FBN, "In Omaha, the U.S. is still triple A. In fact, if there were a quadruple-A rating, I'd give the U.S. that." 

Buffett wasn't the only one who was bewildered about the S&P's decision. Paul Krugman wrote in a Times editorial that "everything I’ve heard about S&P’s demands suggests that it’s talking nonsense about the U.S. fiscal situation." He added:

In short, S&P is just making stuff up — and after the mortgage debacle, they really don’t have that right. So this is an outrage — not because America is A-OK, but because these people are in no position to pass judgment.

Let's add a little more outrage before we move on: Robert Reich, professor of Public Policy at Berkeley and former Secretary of Labor under Clinton, wrote that S&P "has no business downgrading the U.S."

Pardon me for asking, but who gave Standard & Poor’s the authority to tell America how much debt it has to shed, and how?... S&P’s intrusion into American politics is also ironic because, as I pointed out recently, much of our current debt is directly or indirectly due to S&P’s failures...
 

Of course not everyone was unhappy about the downgrade. GOP hopefuls were quick to lay the blame squarely at the current administration. CNN amalgamates the responses from Washington. Michelle Bachmann lays it on thickest:

"The United States has had a AAA credit rating since 1917. That rating has endured the great depression, World War II, Korea, Vietnam and the terrorist attacks on 9/11... President Obama is destroying the foundations of the U.S. economy one beam at a time. I call on the President to seek the immediate resignation of Treasury Secretary Timothy Geithner and to submit a plan with a list of cuts to balance the budget this year, turn our economy around and put Americans back to work." 

But she wasn't alone. Rick Santorum had a particularly curious reaction; much was made yesterday over the fact that there was a mistake in S&P's original calculation yesterday that was spotted by the Treasury, that said the S&P's calculation was $2 trillion off. But according to Santorum, this was just another excuse. He said in a statement:

I understand the U.S. Treasury is going back to Standard and Poor’s to say that a two trillion dollar mathematical error by S&P contributed to the downgrade. So, in addition to blaming President Bush for all of its problems, now the White House is blaming S&P – but this happened on the President's watch – and he has to deal with it.

Right. We're somewhat lost on the comparison, but moving on. Mitt Romney's reaction was, perhaps not unexpectedly, a bit more dry than Bachmann's, but with similar themes. He said in a statement:

“Standard & Poor’s rating downgrade is a deeply troubling indicator of our country’s decline under President Obama. His failed policies have led to high unemployment, skyrocketing deficits, and now, the unprecedented loss of our nation’s prized AAA credit rating.”

John Boehner also lay the blame squarely with the Democrats, and brought back the tortuous debt ceiling debate to show who was right and who was wrong:

Republicans have listened to the voices of the American people and worked to bring the spending binge to a halt. We are no longer debating how much to spend, but rather how much to cut. Unfortunately, decades of reckless spending cannot be reversed immediately, especially when the Democrats who run Washington remain unwilling to make the tough choices required to put America on solid ground.

But Senate Majority Leader Harry Reid saw things quite differently. In his estimation, the downgrade is a wake-up call for joint committee on the debt, and it:

"shows why leaders should appoint members who will approach the committee’s work with an open mind - instead of hardliners who have already ruled out the balanced approach that the markets and rating agencies like S&P are demanding.”

Finally, Snoop Dogg wasn't happy either, and had a little more general advice. He tweeted: "US Economy downgraded #getyomoneyright"

Indeed.