It's the downgrade, stupid.

Forget the budget cutting - an exercise in futility as the CBO told us when scoring Boehner's plan. What we should be scared of is a downgrade in US creditworthiness when S & P and other rating agencies snatch our AAA bond rating and hand us a AA mark of Cain.

Politico:

But what really haunts the administration is the very real prospect, stoked two weeks ago by Standard & Poor's, that Barack Obama could go down in history as the president who presided over his country's loss of its gold-plated, triple-A bond rating.

Obama could win and lose at the same time, striking a deal to avoid default but failing to pass muster on the substance of that deal with credit agencies, which could go ahead and downgrade the rating anyway.

Financial analysts say such a move would hit Americans with more than $100 billion a year in higher borrowing costs, but it's not just that. It would be a psychic blow to a nation that already looks over its shoulder at rising economic powers like China and wonders, what's gone wrong? And it would give the president's Republican rivals a ready-made line of attack that he's dragging the country in the wrong direction.

It's what drives his Treasury Department into cajoling and pleading with the bond ratings agencies to be patient, like a harried coach working the refs from the sidelines.

That hundred billion dollars is a floor. Prospects of a much larger increase in servicing the debt are pretty good. And one can imagine GOP ads touting the downgrade. This is something every American can understand at a gut level. They might not know high finance, but they can grasp the symbolism of decline that a downgrade represents. It would be a killer for Obama - the most visible evidence of his failure as president and steward of the economy.

But let's hope that we don't have to deal with a credit downgrade. The economy is already teetering back into recession and the higher borrowing costs for government would only make it worse. It might be good politically for Republicans but it would be a catastrophe for millions of Americans whose jobs would be at risk.



Forget the budget cutting - an exercise in futility as the CBO told us when scoring Boehner's plan. What we should be scared of is a downgrade in US creditworthiness when S & P and other rating agencies snatch our AAA bond rating and hand us a AA mark of Cain.

Politico:

But what really haunts the administration is the very real prospect, stoked two weeks ago by Standard & Poor's, that Barack Obama could go down in history as the president who presided over his country's loss of its gold-plated, triple-A bond rating.

Obama could win and lose at the same time, striking a deal to avoid default but failing to pass muster on the substance of that deal with credit agencies, which could go ahead and downgrade the rating anyway.

Financial analysts say such a move would hit Americans with more than $100 billion a year in higher borrowing costs, but it's not just that. It would be a psychic blow to a nation that already looks over its shoulder at rising economic powers like China and wonders, what's gone wrong? And it would give the president's Republican rivals a ready-made line of attack that he's dragging the country in the wrong direction.

It's what drives his Treasury Department into cajoling and pleading with the bond ratings agencies to be patient, like a harried coach working the refs from the sidelines.

That hundred billion dollars is a floor. Prospects of a much larger increase in servicing the debt are pretty good. And one can imagine GOP ads touting the downgrade. This is something every American can understand at a gut level. They might not know high finance, but they can grasp the symbolism of decline that a downgrade represents. It would be a killer for Obama - the most visible evidence of his failure as president and steward of the economy.

But let's hope that we don't have to deal with a credit downgrade. The economy is already teetering back into recession and the higher borrowing costs for government would only make it worse. It might be good politically for Republicans but it would be a catastrophe for millions of Americans whose jobs would be at risk.



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