RSN Fundraising Banner
FB Share
Email This Page
add comment
read more of todays top articles

Paul Krugman writes: "Let's start with S&P's lack of credibility. If there's a single word that best describes the rating agency's decision to downgrade America, it's chutzpah - traditionally defined by the example of the young man who kills his parents, then pleads for mercy because he's an orphan."

Portrait, New York Times columnist Paul Krugman, 06/15/09. (photo: Fred R. Conrad/NYT)
Portrait, New York Times columnist Paul Krugman, 06/15/09. (photo: Fred R. Conrad/NYT)

Credibility, Chutzpah and Debt

By Paul Krugman, The New York Times

08 August 11

To understand the furor over the decision by Standard & Poor's, the rating agency, to downgrade US government debt, you have to hold in your mind two seemingly (but not actually) contradictory ideas. The first is that America is indeed no longer the stable, reliable country it once was. The second is that S&P itself has even lower credibility; it's the last place anyone should turn for judgments about our nation's prospects.

Let's start with S&P's lack of credibility. If there's a single word that best describes the rating agency's decision to downgrade America, it's chutzpah - traditionally defined by the example of the young man who kills his parents, then pleads for mercy because he's an orphan.

America's large budget deficit is, after all, primarily the result of the economic slump that followed the 2008 financial crisis. And S&P, along with its sister rating agencies, played a major role in causing that crisis, by giving AAA ratings to mortgage-backed assets that have since turned into toxic waste.

go to original article your social media marketing partner


A note of caution regarding our comment sections:

For months a stream of media reports have warned of coordinated propaganda efforts targeting political websites based in the U.S., particularly in the run-up to the 2016 presidential election.

We too were alarmed at the patterns we were, and still are, seeing. It is clear that the provocateurs are far more savvy, disciplined, and purposeful than anything we have ever experienced before.

It is also clear that we still have elements of the same activity in our article discussion forums at this time.

We have hosted and encouraged reader expression since the turn of the century. The comments of our readers are the most vibrant, best-used interactive feature at Reader Supported News. Accordingly, we are strongly resistant to interrupting those services.

It is, however, important to note that in all likelihood hardened operatives are attempting to shape the dialog our community seeks to engage in.

Adapt and overcome.

Marc Ash
Founder, Reader Supported News

+71 # fredboy 2011-08-08 10:23
The key point in this discussion is "an extremist right that is prepared to create repeated crises." We are dealing with, and our news media cater to and promote, an extremely dangerous movement. They are beyond reason, beyond truth extremists. And they will cripple and destroy this nation if we let them.
+17 # Reductio Ad Absurdum 2011-08-08 15:00
The banana Republicans are Masters of Disasters — Iraq War, massive run up of off the books debt in the Bush admin, financial catastrophe of 2008, and now this artificial debt-ceiling crisis that they turned into a real-world screw-up.
+3 # MidwestTom 2011-08-08 10:32
The Chinese rating agency also downgraded the U.S. debt.
+22 # BradFromSalem 2011-08-08 11:25
Of course they did.

S&P gave them cover to raise their interest rates. Its the same trick used by airlines in the US.
+14 # BradFromSalem 2011-08-08 11:36
Does S&P use a consistent set of metrics that can be noted as the measurement tool that is used to determine a rating? Are the metrics the same for a democracy vs. a dictatorship? From what I have heard so far it appears that they have decided that the messiness that describes democracy is a point against us.

And why haven't the other rating agencies lowered our rating? We need to hear more facts from our erstwhile news outlets.

Better yet, just tell me who won. Obama or Tea party. The rest of the Republicans or the rest of the Democrats. America or China. Red Sox or Yankees, whoops; that one we know because that is actually a game that has a winner and a loser (sorry Yankee fans). Our politics requires information, not scorecards and talking heads that talk out of their rear ends.

Krugman is rarely invited on as a talking head, so he ain't in that category.
+11 # Texas Aggie 2011-08-08 14:28
Apparently they don't. Yesterday I read a column where S&P was being criticized because they consistently overvalue corporate bonds while undervaluing municipal bonds, even from municipalities that have never missed a payment.
+1 # karenvista 2011-08-08 23:30
The ratings agencies, Standard & Poor's, Fitch and Moody's are all paid by the companies whose products they rate, therefore they have a built-in conflict of interest.

They described their ratings of sub-prime mortgage securities as AAA as "competing for the business."

They also charge countries for their rating services so I hope we didn't pay them much, or maybe that's why we got the rating we got. Though we do all have to admit that our recent debt ceiling debacle exposed the fact that we are being controlled by a bunch of incompetents who have no particular interest in paying our legally incurred debts.

I have known that the rating agencies were a prime reason for the financial collapse and the destruction of many pension funds that are only allowed to invest in AAA rated investments. I only recently found out that even countries have to pay the Big Three's Sovereign Debt Ratings entities for ratings as well. What a scam.

And the U.S. government gives them authority to do business under this "pay to play" system of bribery. Serves us right!
+4 # LY Fong 2011-08-08 12:00
Dagong is the name of the Chinese rating agency. Xinhua News Agency has a new global English cable TV channel called ICN information culture news which airs on Comcast cable channel 175 in San Francisco. Some cities get CCTV-9 English channel.
+1 # karenvista 2011-08-08 23:31
Quoting MidwestTom:
The Chinese rating agency also downgraded the U.S. debt.

China is rated lower than we are.
+17 # dkonstruction 2011-08-08 11:08
This (Moody's) is a US company that has downgraded the US credit rating during wartime...this makes it harder (more expensive) for the US to borrow which, since it is wartime, affects our national security and gives aid and comfort to "the enemy." In other words this is an act of treason. The company should thus be nationalized and its owners/board members brought up on charges of treason (the penalty for which is death but since i'm against the death penalty i will settle for life in prison -- preferably in Guantanemo until it is closed -- without any chance of parole.
+3 # penguinshape 2011-08-08 14:21
Well dkonstructed - and a good example of the sarcastic flair, rhetorical creativity, and grasp of the American psyche we need in today's political environment.
+34 # RikiT 2011-08-08 11:08
There should be a litmus test for future Democratic presidential hopefuls: Will you put the economic reins in the hands of Paul Krugman? Or maybe we should launch a draft Krugman movement. Krugman and Bernie Sanders and Simon Johnson are the voices Americans most need to hear.
+21 # DPM 2011-08-08 11:28
True, but we need a president with resolve, a Democratic party with drive, a media reporting important facts and voters with intelligence. Where do we start?
+2 # tomo 2011-08-08 17:03
DPM: I think you address the point that is missing in this particular effort by Paul. Sure, the Republicans are crazies. The question is: How did they become this powerful? The answer is: Nature abhors a vacuum. By doing so little on the foreclosure crisis and the jobless crisis, Obama created a vacuum--into which the Seven Devils (or more) of whom Jesus spoke have come forward. To his credit, Paul has noted such things in past articles. Maybe S&P has no business faulting the economy, but then Geithner is hardly in a position to fault S&P seeing he is just as feckless as they are. Paul's thoughts to the contrary, this is the kind of blame-game one can expect in a failed presidency.
+3 # dkonstruction 2011-08-08 11:31
sorry...meant S&P not Moody's in prior post
+7 # Patch 2011-08-08 11:59
As always, Paul Krugman gets it right.

We need to write letters to the President and our representatives to let them know how we feel. We need to urge the President to announce he won't seek a second term. Millions upon millions of letters to get the message across.
+1 # Patricia Chang 2011-08-08 12:45
You are SO right!
+4 # humanmancalvin 2011-08-08 12:13
Yup Paul..this is indeed a prime case of the kettle calling the pot black.
+15 # Isar 2011-08-08 12:24
Just heard the President's speech....For once in my life, I would like to hear the Commander-in-Ch ief personally apologize for the senseless deaths of young people he has sent to fight a war that is NOT a war protecting this country. The people of Afghanistan have NOT attacked us. The Taliban just want us OUT of their region of the world. We have no business being there. But...young Americans are still dying there, and our President uses the same platitudes we have heard for years....I'm sorry...but these men didn't die "for their country"...They died because they are in the wrong place. They should be home with their families. They died because a bunch of old men in the Pentagon decided we should be in Afghanistan...T hey died because the Commander in Chief won't bring them home. How disappointing, Mr. President. Once again, you have compromised your position on war. WHO is holding a gun to your head? WHY are you so insensitive to the real problems of this country? WE are moraly bankrupt. The rest of the world scratches their heads and is bewildered at the crumbling of our national pride. It's not just about greed. It's about a sense of self-worth. The kind of sense that our Grandfathers had when they DID see the need for WWII. We are not the Greatest Generation....N ot even close. Please, Mr. come the leader that you promised us you could be.
+12 # Patricia Chang 2011-08-08 12:53
Obama presented us with a dream that has turned into a nightmare. He cannot be the leader he promised to be, because he NEVER WAS that leader.That person was a figment of campaign consultants.Oba ma is a right-of-center Republican, elitist, corporatist Yuppee. He does not care about the average persons concerns. He cares about hefty campaign donations, prestige, power and his own wealth. He has been busily selling us down the river since he took the oath of office. Look at his appointments. It says it all. He is NOT going to change. He sees absolutely no need for it. Start calling for him to step down as the 2012 presidential candidate. The New York Times article: "What Happened to Obama?" is a must read. All of us have to join together to demand a more experienced, honest, courageous, compassionate, commone sense-based candidate on the Democratic ticket. We need someone with integrity, someone we can trust. Obama is not and never will be that person.
+3 # Debbie 2011-08-08 14:27
I'm with you Patricia, I hope that if no other progressive decides to run, Bernie Sanders decides to.
0 # jon 2011-08-08 18:16
Once again, Patricia Chang NAILS it !!

Keep it UP !!
+1 # Cynthia 2011-08-08 14:44
true, but not germane to this article.
0 # tomo 2011-08-08 17:10
Well, I don't know, Cynthia. If you listened closely, I think you could hear Obama himself trying to associate his failure with the economy with his failure in Afghanistan. He wanted to summon the rest of us to look to the sacrifice of these thirty Americans--a sacrifice made in his behalf--and imitate it.
-3 # tomo 2011-08-08 17:06
Well, Isar, don't you see that Obama SHOULD find much to praise in the sacrifice of these thirty Americans? Here are thirty Americans, mostly young I would think, who have given their whole lives as volunteers in Obama's re-election campaign.
+3 # rothdove 2011-08-08 12:31
and Bachmann, in her crusades against abortion, education standards, gay marriage—as well as in her passionate opposition to raising the debt ceiling—has always cast government as the villain,

Read more

Notwithstanding S&P's poor track record, they redeemed themselves with their current gutty position
The issue is not an arithmetic one. It is a political one.So who cares if they allegedly made a $2B error ( which I don't believe appeared in the released version of their report)
So long as there are Michelle Bachmann types (as described above) there is always a risk of default. Particularly, since the decision to raise the debt ceiling was a result of a cliff-hanger. And it was sausage-making ugly!!!
+1 # Sukumar 2011-08-08 19:57
S&P did not downgarde US credit because they are afraid of Bachmann. They downgarded us because we didn't agree to abolish (sorry, "reform") Social Security & Medicare right away.
+10 # angelfish 2011-08-08 12:33
Just as the deficit ceiling extension was a scam, the Fascists of the former ReTHUGlican party have, in all probability, encouraged S&P's down grading of our ability to pay our debts. They will do ANYTHING, and EVERYTHING to see this President Fail. They said it from day one and have seen it through to it's evil Fruition! They don't give a Big Rat's A** if we go belly up, as long as this Administration fails. Granted, the President did little to thwart them as he acquiesced to their EVERY demand but what THEY have done borders on TREASON!
+3 # suzyskier 2011-08-08 13:07
Well said angelfish. I sure would like to see them taken down. They (right wingers, tea party etc) have made it their goal to bring the President down. They dream of being in the majority for the next millenium. As far as they are concerned it only a matter of time for them. They keep pushing and lying.
Unfortunately we have enough politically naive populance that believes everything Fox news and Limbaugh, Reilly, Palin and their ilk tell them. Or perhaps they are just too lazy to investigate further. It is all so easy to sit there in front of the telie and not Have to think for oneself.
I have just seen the most recent propaganda depicting Obama in the oval office surrounded with Islam artifacts! And even sensible people (or so I thought) bought into the obvious photo shop propaganda. So sad
+9 # Doc Mary 2011-08-08 12:34
The words "bloodless coup" spring to mind ...

More seriously - you can reduce a deficit by reducing spending (and why ARE we the world's "policemN" anyway) OR by increasing revenues.

I think we should take S & P's comments at face value, and raise their taxes. For the folks who had the chutzpah (as you said) to downgrade not only US debt, but they are now heading to do more damage - the patriotic thing to do would be to quit whining about rescinding the Bush tax cuts, and agree to pay them. I'm sure they'll still be able to afford nice sears at the Super Bowl.
+8 # shesap 2011-08-08 13:16
I'm getting sick of tearing down the President without any real concrete solutions offered on how to get rid of the total blockage going on in Washington by the TeaGOP. He needs a bloodless revolution, I agree to take back the government OF the people, not OF right wing extremists or the corporate jet owners.
+1 # tclose 2011-08-08 15:47
Krugman again eloquently lays out what really is going on, and what it means.
Now we need a concentrated effort by progressives - and intelligent Independents and Republicans - to make the necessary corrective actions to counter the recent forays by the extreme right who have usurped power in our nation.
+2 # tclose 2011-08-08 15:52
...And, we need Pres. Obama to step up and use his bully pulpit, to let the American people know what needs to be done to restore our economy in a fair and balanced way. And restore our faith in government by the people for the people.
+1 # rhoda 2011-08-08 18:13
Bumper sticker idea for a progressive challenge to Obama in 2012: NO MORE, Mr. NiceGuy. Step up, or Step DOWN.
0 # Dick Huopana 2011-08-08 19:58
Krugman's column contains this sentence

"It’s true that we’re building up debt, on which we’ll eventually have to pay interest."

The word "eventually" caught my attention. Doesn't Paul know that "eventually" is past, present,and ad nfinitum.

Federal debt interest for fiscal year 2011 has already cost $413 billion with two months to go. Interest in 2010 cost $414 billion. And debt interest since Reagan's 1981 inauguration to the present has cost $8.6 trillion.

And much of this enormous interest expense has been paid at historically and artificially low interest rates. So, when interest rates return to higher historical levels, expect our debt interest burden to at least double.

OK, I'm guilty of "crying wolf." Forgot that we will pay all that interest by borrowing and further swelling the federal debt which, of course, is going to be cheerfully re-paid by our children, grandchildren, et al.
+2 # J D Walling 2011-08-08 20:07
Like a failing student paying the teacher for an A, the rating agencies were "compensated" handsomely by the resellers of toxic mortgage paper.

That's deregulated capitalism. The primary rule? Hurrah for me; screw you.
+8 # karenvista 2011-08-09 00:36
Quoting Dick Huopana:

"It’s true that we’re building up debt, on which we’ll eventually have to pay interest."

Do you know that we have almost 500,000 troops abroad in Iraq & Afghanistan and about 600 bases overseas? And we have more than 100,000 contractors in Iraq and Afghanistan alone. How about bringing them all home and cutting the Pentagon budget, including the "Black" budget by at least half?

How about doing away with the Bush tax cuts of 2001 & 2003?

How about doing away with the 15% tax rate for the hedge fund managers?

How about overruling the Republicans and allowing Medicare to negotiate drug prices for Medicare Part D?

How about getting rid of the insurance companies and bringing our expensive healthcare system under control? We pay at least twice as much as any other developed country for healthcare and rate 37th. for outcomes.

Short-term Treasuries are paying about .25% interest now and longer term Treasuries run around 2.5% interest so borrowing is very cheap.

You have your choice of making adjustments as suggested above and increasing government infrastructure spending, jobs programs & education so we can have employed tax paying citizens again.


You can leave your children a vast, unemployed wasteland.

+3 # Dick Huopana 2011-08-09 13:59
It's good to see a comment like yours displaying the causes of the government's fiscal crisis (including numbers)which when corrected become solutions.You should be a member of the U.S. Congress, perhaps as a member of a new Realist Party.

THE NEW STREAMLINED RSN LOGIN PROCESS: Register once, then login and you are ready to comment. All you need is a Username and a Password of your choosing and you are free to comment whenever you like! Welcome to the Reader Supported News community.