Friday, August 12, 2011

One of These Is Not Like the Other

By Tim Dunkin

Well, it finally happened. One of the major financial houses, Standards and Poor, reached the point where the fiscal irresponsibility of the United States federal government could no longer be ignored, and downgraded America’s credit rating to AA+. For those in our nation who can still feel shame, this ought to be something that creates some embarrassment for our national prestige and place in the world. For the first time since 1917 – in other words, since the United States of America became a truly world power, rather than merely a large regional one – America has not held an AAA rating, that rating being an indicator of both financial soundness and economic prosperity. The negligent and reckless way in which our government has conducted its affairs for the past decades is finally catching up to us, brought to a head by the vast acceleration in government spending and debt accrual that characterized both the Bush and the Obama administrations, but which became especially egregious over the past three years.

Of course, the mainstream media and the Democrats have fully risen to the occasion by trying to proclaim this the “Tea Party downgrade.” It was, they say, the attempts to stop the federal government from putting itself further into debt that caused S&P to lose confidence in our government – even though S&P and other financial giants had been telegraphing signals all along that said just the opposite, that if the USA didn’t work to reduce debt, then a downgrade would come. Nevertheless, the Democrats and the media are in full spin mode, trying to weave a projected reality out of obvious fantasy. I think a lot of this is merely cynicism on their part. They are counting on the large majority of typical network news viewers, who tend to be less educated and less politically knowledgeable, being too ignorant to understand the whats and whys of the credit rating downgrade. As is their usual modus operandi, the Left uses ignorance to try to tar its opponents and advance its agenda.

Now, I’m no financial expert or anything, but I tend to think that understanding the basics of the credit ratings and why the downgrade occurred should be fairly simple. Let’s relate it to our own experience – that of the “credit scores” that pretty much every American who has ever used a credit card, borrowed, or owed money has. The higher the score, the more likely you are to be able to get loans, have higher credit limits on your credit cards (which I consider to be dangerous, but…), and so forth. In other words, when you have a high credit rating, banks and other financial institutions consider you to be a good credit risk. In their view, you are more likely to pay back the money you borrow with interest; you are less likely to default or go bankrupt or otherwise prove to be a black hole down which their money was thrown. Your credit score goes down, however, with the more money you owe vis-à-vis your ability to pay back, and especially if you don’t pay back, but go into default on your debts. In other words, if you don’t pay what you owe, and you keep racking up more and more debt, you become an increasingly bad credit risk, which means you lose the “preferred” status that would allow you to get more loans, if you need them, and at lower interest rates.

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What essentially happened with the downgrade was that America’s credit rating got lower. We went from having an “800” to a “600,” so to speak. America, because of the fiscal policies of our government over the past years, is now a bigger credit risk to investors (often foreign governments and international banking houses) who we would seek out to borrow from by selling them bonds and so forth.

While Obama and the Democrats have certainly made the problem much worse in the three years he’s been in office, the fault does not lie entirely with him. George W. Bush and the Republicans in Congress after 2000, when Bush took office, bear part of the blame. Bush’s “compassionate conservatism,” which was really just big government social spending programs dressed up in language designed to appeal to moderate conservatives, helped to set the stage for the Obama spending spree of recent years. Remember folks, before Obamacare, Bush and the GOP in Congress gave us a prescription drug plan costing hundreds of billions of dollars – financed by borrowing, for the most part. That’s just one example. That, and the expensive wars in Iraq and Afghanistan, pushed American budget shortfalls, borrowing, and debt to new levels. Bush, who was quite fiscally irresponsible in most respects, had a willing Republican Congress in all this – they went along with it, since Bush was “our” President, which apparently made the spending okay. The Republicans of the 1990s who helped give us a balanced budget for the first time in a generation, and who generally held the line on new spending, and who even cut spending via things like welfare reform, gave way to a new breed of Republican in the Noughties who thought that they had what it takes to compete with the Democrats in the area of buying votes by handing out goodies.

Of course, the Republicans then lost their base in 2006, and the Democrats were back in power in the House, having the purse strings and a still willing big spender President, and the spending and debt began to quicken even more. Then, Obama came to power, and we began to see budgets that included larger deficits (and therefore debt) in one year than Bush had accrued in eight, and the end was nigh at hand. While some Republicans, especially the “Tea Party Freshmen” tried to hold the line on spending and debt, the combination of the Democrats as well as establishment faux-“conservative” Republicans have still tended to make a mockery of any meaningful reform of our spending and debt policies, as the recent John Boehner compromise on the debt ceiling increase – trading an increase in debt of $2.4 trillion dollars for miniscule “cuts” (really, reductions in the rate of increase) that are spread out over ten years, and which future congresses are not even obliged to enact anywise.

This is why S&P downgraded our credit rating. They and other financial houses had been warning that we needed to get spending under control. They told us that the way to keep our sterling credit rating was not to raise new taxes, but to cut spending and reduce debt. They alerted us to what needed to be done, but our government ignored it, and enacted a “compromise” that increases our debt drastically. We made ourselves a credit risk through our fiscal irresponsibility.

Yet, this is a “Tea Party downgrade.” Because, even though we were told that increasing our debt would lead to a downgrade, the people who wanted to take steps to reduce our debt are really to blame.

How’s that for an inversion from reality?

What’s ironic in all this, too, is that we can show empirically that when governments follow the “Tea Party” model of reducing debt and pursuing fiscal responsibility, prosperity (and good credit ratings) follows.

Let’s look at the following list: Alaska, Texas, Indiana, Mississippi, Ohio, the US federal government. One of these is not like the others. I don’t just mean that the first five are states, while the last is not. There’s something much more important and pertinent to the discussion here. What is the difference?

Within the last five or six years, all five of these states have seen their credit ratings UPgraded:

• Alaska was upgraded from AA to AA+ in March of 2008 by S&P
• Mississippi was upgraded from AA+ to AAA in April of 2010 by Moody’s
• Indiana was upgraded from AA+ to AAA in 2005 by S&P
• Texas was upgraded from AA to AA+ in 2009 by S&P
• Most recently, Ohio was upgraded from AA+ to AAA in July of this year by S&P

Now, what was or is common to all five of these states at the times they received their credit rating upgrades, at the times when the big financial houses chose to consider these states to be better credit risks? The answer – they all had or have conservative Republican governors working with state legislatures dominated by conservative Republican lawmakers. Conversely, even to this day, the federal government has a radically left-wing President working with a legislature controlled by a coalition of leftist Democrats and RINOs. Hence, in each of these five states, real financial reforms such as budget balancing, spending cuts, and even tax decreases designed to make these states more business (and therefore employment and prosperity) friendly were enacted. Meanwhile, at the federal level, even with “Republicans” like Boehner in control of the House and like McConnell and McCain representing the Party in the Senate, little is actually being done to stop the fiscal insanity.

There’s a reason why Texas’ economy is in a relative boom period while the nation as a whole, and especially Blue states like California and Illinois, are languishing in the doldrums. There’s a reason why Ohio has a balanced budget while Maryland does not. Think about this – Sarah Palin, who the lefties love to bash as “unintellectual” and “stupid” managed to get her the state the same credit rating that Barack Obama just got for us. The difference is that she moved her state up, while he moved us down. That tells me that Sarah Palin is a lot smarter and more capable than the Teleprompter Cowboy. Likewise, consider this – Mississippi, poor, backwards, uneducated Mississippi which the Left thinks is just chock full of slack-jawed, trailer park-living, Republican voting yokels – now is considered more financially sound that the US government, thanks to Barack Obama.

Each of these governors - Palin in Alaska, Barbour in Mississippi, Daniels in Indiana, Perry in Texas, and Kasich in Ohio – took steps that were unpopular at the time, but have since proven to be justified by the results provided to their states. Each one worked with conservatives in their respective legislatures to get real budgetary and fiscal reforms passed. Each one labored to fix the problems in their states and saw confidence in their state economies improve as a result. While the Tea Party movement may not have even existed when several of them were in office and/or when their state credit upgrades occurred, the benefits nevertheless happened because these governors, and conservatives in their state legislatures, put fiscally “Tea Party” principles into practice.

So I suppose it would be fair to call them “Tea Party upgrades,” would it not?

We need to shout this from the housetops, loudly and repeated. Don’t let the media and the Democrats get away with lying to the American people about the Tea Party being “at fault” for the downgrade and further financial implosion in this country. The Democrats and the RINOs are squarely to blame for all of this, because they are the ones who pursued crazy financial policies that have bankrupted this country and put us in hock to China. The people at fault are the ones who just keep spending and spending and spending. The fault does not lie with the true conservatives, the “Tea Partiers,” who tried in vain to see real fiscal responsibility returned to our government.