So wait a minute. I'm hearing two totally different messages from the government:
1. The S&P downgrade doesn't matter. (i.e. shoot the messenger, discredit the truth teller)
2. If it does matter, it's the TEA party's fault
So which is it?
I'll be the last to pat the backs of the rating agencies but when someone holds an intervention to tell a drug-addicted friend, "you have a problem," the last thing people should do is demonize the person intervening.
If anyone on the planet, other than the Oracle of Omaha who has taken a relativism approach on ratings, thinks the U.S. and it's $14 Trillion in debt and atrocious Debt-to-GDP ratio deserves the HIGHEST credit rating available, raise your hand. For comparison, try working a $50K/year job, having $50K in credit card debt with a plan to only increase that debt to $75K over the coming years, and then tell Equifax or TransUnion you expect an 850 FICO score.
S&P told us something that we all already knew, and now the government is criticizing S&P for doing exactly what the government told them they should have done during the mortgage/CDS meltdown -- start raising the red flag. Well S&P is raising the red flag, they're calling bullspit on the token Debt Ceiling agreement from last week. And, the reports that the government furiously lobbied and made last ditch efforts to thwart a S&P downgrade on Friday night is amazing. Like a crack addict with a needle hanging from his arm yelling, "I don't have a drug problem," Geithner and the administration are failing to face reality and think that they can simply talk their way out of what are very real consequences to not having our fiscal house in order.
S&P telegraphed this for months, calling for $4T in cuts and saying anything less wouldn't support a pristine credit rating. When the government gave us a $2T deal with little/no real teeth and kicked the can down the road to some "super commission" what did the government think would happen? Why is this a shock? And, why does the administration now shoot the messenger?