Not the Obama Downgrade: Media Error

     If you saw my earlier post on the S&P downgrade you understand my concern with this has not been economic-there is no validity in the US downgrade. Nevertheless on my radio show that I co-hosted with the inimitable and always knowledgeable Turbo Kitty, I did get a piece that wasn't in the mainstream media.   For while the early spin from the GOP has been that this is the "Obama downgrade" it is interesting to note that this is not the takeaway S&P intends.

    Anyone who has listened to my show in it's first week on the New Stand Media has heard Kitty in action and appreciates the knowledge and passion she brings to the progressive cause. After hearing my analysis of the downgrade she said, "Yes, but.." and urged me to look at the following article.

     http://www.sfgate.com/cgi-bin/blogs/abraham/detail?entry_id=94858#ixzz1UNKMCpbJ

     The headline on this piece

S&P Blames GOP For U.S. Credit Problem, Associated Press, Politico Cover It Up

      says it all. The point that S&P makes is twofold-it was GOP intransigence that greatly concerned it going forward in coming up with a workable deal and also that the media-and bracingly it names names, and singles out Politico and the Associated Press as not adequately reporting this,

      This is a pretty big deal for S&P to call out these two outfits particularly AP which has a very good reputation among the mainstream press for accuracy; the Associated Press is sort of like Kleenex for tissues not merely considered best of breed but more or less synonymous with.

        Check out the following two paragraphs in S&P's press release.
     
           The outlook on the long-term rating is negative. As our downside alternate fiscal scenario illustrates, a higher public debt trajectory than we currently assume could lead us to lower the long-term rating again. On the other hand, as our upside scenario highlights, if the recommendations of the Congressional Joint Select Committee on Deficit Reduction--independently or coupled with other initiatives, such as the lapsing of the 2001 and 2003 tax cuts for high earners (my emphasis)--lead to fiscal consolidation measures beyond the minimum mandated, and we believe they are likely to slow the deterioration of the government's debt dynamics, the long-term rating could stabilize at 'AA+'.

...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.

         As is clear, a major concern for S&P is that the Bush tax cuts will not expire as the GOP will block any attempt.

 

          When given the perspective, S&P's concerns are more understandable.  S&P's action still seems rash and unnecessary but it is true that right now with our economy in shambles the revenues from expiration of the Bush tax cuts would be a major shot in the arm.