Now that the world has finished reeling from the news that the United States' credit rating was downgraded for the first time in history, the real debate has begun. Who is to blame for the downgrade? Certainly, many including Paul Krugman and Warren Buffett dismissed the S&P's downgrade outright. The Treasury itself pointed out the infamous math error the ratings agency made that caused its calculations to be off by trillions. But leaving criticisms of the S&P and the flawed credit ratings system aside, once it was accepted that the downgrade is here to stay, we can go back to the really compelling battle between Republicans and Democrats. The idea seems to be that one party is clearly to blame for the debt downgrade. But which party could it be?
For evidence, we have the S&P press release and its statements that accompanied the downgrade. Problem is that it's sort of vague with regard to pinpointing a villain. For example, the release says:
The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics... More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.
The Republicans point to the press release's language on spending -- and declare that their position for spending cuts during the debt ceiling debate was right all along -- and if anything, the downgrade is the result of their demands were not met enough. John Boehner responded to the press release:
"Republicans have listened to the voices of the American people and worked to bring the spending binge to a halt...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."
And Michele Bachman similarly reacted that "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."