Saturday, August 06, 2011

Here's Another Nice Mess

August 6, 2011, 8:30 a.m.

Congress as Laurel and Hardy

Stan Laurel and Oliver Hardy created one of the most popular two-man comedy teams ever, "Laurel and Hardy." Together they made some 100 films from the 1920s to 1950s. See, "Laurel and Hardy," Somewhere in each film, or stage routine, "Ollie" would inevitably deliver the line, "Well, here's another nice mess you've gotten me into."

The behavior of our Congress, especially the House, calls to mind that line of Ollie's.

In "When Obstruction Becomes Treason," July 30, I referred to our waiting for "the other boot to fall."

Well, there it now is, right on our neck.

"Standard & Poor’s removed the United States government from its list of risk-free borrowers for the first time on Friday night [August 5, 2011] . . .." Binyamin Appelbaum and Eric Dash, "S.&P. Downgrades Debt Rating of U.S. For the First Time," New York Times, August 6, 2011, p. A1.

Let me repeat that, while you think about it: "Standard & Poor’s removed the United States government from its list of risk-free borrowers for the first time . . .."

What does "for the first time" refer to? It is a reference to the beginning of the United States of America's government on March 4, 1789. See "United States Constitution,"

That's right. For the first time in the history of our country we have a Congress so partisan, so selfish, so childish, so stupid, so irresponsible, so ideologically constrained, as to be willing to bring down the credit rating of our country.

Indeed, the only good news seems to be that the performance has attracted both the attention and the basic good sense of the American people: "A record 82 percent of Americans now disapprove of the way Congress is handling its job — the most since The Times first began asking the question in 1977 . . .." Michael Cooper and Megan Thee-Brenan, "Disapproval Rate for Congress at Record 82% After Debt Talks," New York Times, August 5, 2011, p. A1.

Now it may be that the sky is not falling -- although the global stock markets are. The other two ratings services, Moody's and Fitch, have not, at least not yet, lowered our credit rating. But it's very hard to argue with S&P's analysis, even if one wishes to argue with its conclusion. As Appelbaum and Dash report:
The company . . . said it was cutting its rating of long-term federal debt to AA+, one notch below the top grade of AAA. It described the decision as a judgment about the nation’s leaders, writing that “the gulf between the political parties” had reduced its confidence in the government’s ability to manage its finances.

“The downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenge,” the company said in a statement.
Isn't that what you think, too?

As further evidence of Congress' role playing Laurel and Hardy with very, very serious business, China is getting nervous.

Imagine you had loaned $1.2 trillion to your brother-in-law, only to discover that he's not quite as reliable, competent and trustworthy in managing a big business as you originally thought. Wouldn't you be a little nervous, too?
China, the largest foreign holder of United States debt, said Saturday [August 6, 2011] that Washington needed to “cure its addiction to debts” and “live within its means,” just hours after the rating agency Standard & Poor’s downgraded America’s long-term debt.

The harshly worded commentary, which was released by China’s official Xinhua news agency, was Beijing’s latest attempt to express its displeasure with Washington. . . .

Chinese officials are clearly concerned that China’s substantial holdings of American debt, worth at least $1.1 trillion, is being devalued.

“The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone,” read the commentary . . ..

Beijing, which did not release any other official statement on the downgrade, called on Washington to make substantial cuts to its “gigantic military expenditure” . . ..

The commentary serves as a sharp illustration of how America’s standing in the world is sliding and that China now views itself as ascendant. . . .

China is sitting on the world’s largest foreign exchange holdings and its economy is growing at close to 9 percent. The country is also once again racking up huge trade surpluses with the rest of the world. . . . [For another example of a country that is enjoying the benefits of a government more intelligent, rational and functional than ours, see "What Brazil Can Teach America," August 4, 2011.]

Beijing policy makers are discussing ways to diversify the country’s foreign exchange holdings away from dollars and also how to encourage Chinese companies to invest some of the foreign reserves overseas. . . .

China has about $3 trillion in foreign exchange reserves . . ..

Analysts say that if China pulls back from purchasing Treasuries, the dollar would weaken and America’s borrowing costs would rise sharply . . ..

[G]overnment leaders here increasingly sound like they are losing confidence.

“International supervision over the issue of U.S. dollars should be introduced and a new stable and secured global reserve currency may also be an option to avert a catastrophe caused by any single country,” the Xinhua commentary said."

"China, a Big Creditor, Says U.S. Has Only Itself to Blame," Reuters/New York Times, August 6, 2011.

The messes that Laural and Hardy got into were fiction, and funny.

The messes that many members of Congress repeatedly get us into are neither fiction nor funny. They're tragedy, not comedy; reality, not fiction.

They keep offering us further proof, if any were needed, that there comes a point at which obstruction is treason. A point Congress has now gone far beyond.

# # #

No comments: