Former Secretary of Labor Robert Reich offered his thoughts this week on the debt ceiling and the spectre of a credit downgrade:
Now I don’t mean to be impertinent, but as long as America pays its debts on time, who is Standard & Poor’s to tell America how much debt it has to shed and by when?
Until the eve of Wall Street’s collapse in late 2007, S&P gave triple-A ratings to what turned out to be some of the Street’s riskiest packages of mortgage-backed securities.
Had S&P done its job, we wouldn’t have had the debt and housing bubbles to begin with. That means taxpayers wouldn’t have had to bail out Wall Street. We probably wouldn’t have had a Great Recession. Millions of Americans wouldn’t be jobless and collecting unemployment benefits. There’d be no need for the stimulus that saved 3 million other jobs. And far more tax revenue would have been pouring into the Treasury.
In other words, had S&P done its job, the federal budget deficit would likely be far smaller than it is today — and S&P wouldn’t be threatening the United States with a downgrade if we didn’t come up with a plan for shrinking it.
Unfortunately, while he has a point, it doesn’t really seem to matter. These are the rules of the game, and they’re not there for sake of anything or anyone other than the people who hope to run it.