AA+

I have relatively little respect for the credit rating agencies. S&P, along with Moody’s and Fitch, were prime movers in rating toxic mortgage debt derivatives as triple A, leading the the crash of 2008. Their work at that time was incompetent (some would say criminal).

But last Friday, S&P did nothing more than report the obvious. The Wall Street Journal comments in an editorial:

…is there anything that S&P said on Friday that everyone else doesn't already know? S&P essentially declared that on present trend the U.S. debt burden is unsustainable, and that the American political system seems unable to reverse that trend.

This is not news.

In that context, the Obama Administration's attempt to discredit S&P only makes the U.S. look worse—like the Europeans who also want to blame the raters for noticing the obvious. Treasury officials and chief White House economic adviser Gene Sperling denounced S&P for relying on a Congressional Budget Office scenario that overestimated the U.S. discretionary spending baseline by $300 billion through 2015 and $2 trillion through 2021.

It’s as if you went into a bank for a loan. The banker does a computer check and finds that your average credit scope is 450. He asks why. Rather than being honest about your profligate spending and subsequent debt and promising to radically modify your spending habits, you blame the credit agencies. You think the banker would listen?

One of the most troubling aspects of the administration's response to the S&P downgrade is that they've do what they always seem to do—blame someone else. Their shills—Senator John Kerry comes to mind—labels the action of S&P as the “tea party downgrade” and of course, the administration’s many supporters in the media pick up the sound bite and run with it.

It’s as if 30 years of profligate spending don’t matter a wit. It’s all the tea party’s fault.

The irony, of course, is that the tea party people were the first group to draw a line in the sand. Rather than the administration’s delusional suggestion that more spending will somehow result in reduced debt, the tea party simply said “stop.” And in the eyes of big government proponents, that makes them public enemy number 1.

The term “wake-up call” has been used repeated by those on the Right to characterize the down grade. But the President and the senate majority have taken sleeping pills and dream about massive increases in spending and untouchable entitlements. There dream then morphs into a class warfare theme in which the “rich” are ravaged and the “disadvantaged” are given the "millionaires and billionaires" money and live happily ever after. The S&P downgrade alarm is buzzing at the President's bedside, but in his drugged sleep, the sound goes unanswered. Sweet dreams.

Update (August 8. 2011):

This morning, Richard Fernandez of The Belmont Club writes darkly about the looming U.S debt crisis: "Like Europe the US seems locked into a course which inertia cannot change and yet which ultimately will lead to ruin. In the history of politics the choice has often been between rationality and ruin. Alas, ruin usually wins."

And the President, his rabid supporters, and many within his party close their eyes, embrace their dreams, and do nothing.