The news that America’s sovereign debt has taken a hit has been the top news story since Friday. But, the nation’s true crisis is that her leaders have decided to fight the downgrade rather than create a strategy to fix the underlying issue: we’re spending more than we make.
Pundits and politicians are arguing about whether S&P made the right decision while the bond markets are largely ignoring the rating change – yields are actually dropping. What the electorate wants to hear from the President is how we fix our fiscal mess, not whether or not S&P got it right.
Treasury Secretary Timothy Geihtner had said that there was absolutely no risk of a downgrade. His basis seems to be the same as former Federal Reserve chief Alan Greenspan when he said, “The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default”. Perhaps Mr. Geihtner should have thought about that when he was raising the default specter before the debt ceiling deal.
Almost in direct response to Geihtner and Greenspan’s terrible idea of printing our way out of the debt mess, today while downgrading Fannie Mae, Freddie Mac and indicating that it would be downgrading the country’s six largest insurers, S&P said, “printing money doesn’t deliver a triple-A rating.”
Despite Tim Geihtner’s missed guess on the downgrade and absolute failure on monetary policy, he is staying in place. Not because he’s the right guy for the job, but because the White House is not about to go through the nomination process for someone new. It would be nearly impossible to get another Keynesian spend-monger through the Senate confirmation process considering the failures of the current administration’s supply-side approach. That’s politics, one of the key factors to S&P’s downgrade. Leadership from Obama would have been to replace the flailing Treasury head and get a new plan implemented.
The White House won’t seek a fresh perspective in Treasury. The administration isn’t serious about lowering the country’s debt-to-GDP ratio. After the downgrade, the only action from the White House seems to have been to .. go after the rating agency and the Conservatives in Congress. On Sunday, Geihtner appeared on NBC and said that, “”S&P decision to cut U.S. credit rating shows stunning lack of knowledge about basic U.S. fiscal budget math.”. No mention of his miscalculation or the necessity of the federal government to curtail spending.
The only call-to-action has so far come from the very segment of Congress that Senate Majority Leader Harry Reid and other democrats are blaming – Republicans. Senator Mark Kirk (R), called for the president to bring Congress back from its August recess to address the issues raised in the S&P report. Congress could then implement the debt-ceiling law and start to craft a real plan – no word from the White House yet.
Where is the leader of the greatest nation on Earth? Where is America’s captain after the nation was shaken by a credit downgrade? Where is the strong-chinned leader of the free world, offering a way forward – a positive plan – to get our nation back on its feet?
During remarks this afternoon the President did point out the good news. Obama said, “Our problems are solvable.” His speech offered no plans, no solutions, only blame and calls for more stimulus spending and to continue the too-small-to-be-effective payroll tax break that he has championed for years.
Obama’s only genuine attempt at fiscal leadership, his budget, went down in flames when it was unanimously defeated in the heavily Democrat Senate 97-0 earlier this year.
S&P was concerned that America may not be able to get its deficits under control and that our leaders would be focused on politics rather than policy. Will the President lead us out of the spending troubles that he helped lead us into or is it too close to his re-election for him to be concerned about policy instead of politics?