In explaining why it was lowering the U.S. credit rating late on Friday, Standard & Poor’s singled out tea party obstructionism on the economy:
“The political brinkmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective and less predictable than what we previously believed,” said S&P, one of three leading credit rating agencies.
“The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy.”
“Brinkmanship” is putting it politely, of course. A better description is economic terrorism or political extortion.
It was the tea party, not the Democrats, who took the economy to the brink in the debt-ceiling negotiations, and yet, predictably, conventional wisdom in the Beltway has it that S&P was referring to everyone in Washington — that the hostage negotiators are just as bad as the hostage takers.
Dave Weigel agrees with the conventional wisdowm, but even he says S&P “really open[ed] fire on the Republicans” with this statement:
Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act. Key macroeconomic assumptions in the base case scenario include trend real GDP growth of 3 percent and consumer price inflation near 2 percent annually over the decade.
For weeks in the lead up to the Aug. 2 deadline for raising the debt ceiling, tea partyists in Congress made it clear that if they did not get their way — if the deal was based entire only on cuts to programs and if it were to include new revenue of any sort — they would vote against the deal and force the United States into default.
Worse, these tea baggers flatly denied that putting the government into default would have any negative consequences.
Then, even when they got their way — even after Pres. Obama and the Democrats agreed to the hostage-takers demands — over 60 Republicans voted against raising the debt-ceiling, including 28 members of the tea party caucus.
The Republican leadership is so terrified that the tea party might oppose them for reelection in the primaries that they cannot enforce normal party discipline.
The GOP’s corporate sponsors undoubtedly liked the cover tea baggers gave congressional leaders to push right-wing policies like killing environmental protections, deregulating energy companies and suppressing unions.
But in the final analysis, Wall Street cares much more about stable markets and profitability than it does about right-wing ideology, and apparently the financial barons — or, at the very least, Standard & Poor’s — believe that by forcing the nation’s economy to the brink, the tea party has gone too far.
As the week wore on, Wall Street reacted negatively to the deal, apparently because they know that government spending is all that is keeping the fragile recovery from slipping backwards — and that the cuts demanded by the tea party in the debt-ceiling deal will undoubtedly cause economic conditions to get worse in the short term.