How about that credit downgrade to round out an immense week for Obama and our political elite in Washington? Let me give you a brief look at how it all went …
* April 2011: There is “no risk” of a downgrade to our AAA credit rating – Treasury Secretary tax cheat Timothy Geithner.
* August 2, 2011: After months of debate, Obama signs a debt ceiling increase, which potentially includes $2 trillion in spending cuts.
* August 5, 2011: Standard & Poor downgrades the U.S. credit rating to AA+ from AAA for the first time in our history.
* August 7, 2011: A Standard & Poor’s official says there is a 1 in 3 chance that the U.S. credit rating could be downgraded another notch if conditions erode over the next six to 24 months.
* August 8, 2011: We waiting for the Treasury Secretary/tax cheat to tell us that there is “no risk” of a downgrade to our AA+ credit rating.
After all that, how did we get here? According to the S&P, they were dissatisfied with how politicians in Washington handled the haggling over budget cuts. Additionally, S&P is not at all confident that we will be able to follow through on the proposed cuts. The head of sovereign ratings at S&P is a guy by the name of David Beers. He says that the S&P was worried about the “degree of uncertainty around the political policy process. The nature of the debate and the difficulty in framing a political consensus … that was the key consideration.” The key to maintaining our current rating, not slipping further, and hopefully bumping back up to our AAA rating will be spending cuts. Period. End of story. While the S&P says that tax increases would be nice, that is not the key for any future downgrade. The key will be spending cuts.