Stocks dropped like a stone Monday when Standard and Poor’s slapped a negative outlook on the credit rating of the United States. The internationally regarded company said there was a one-in-three chance that it could cut its long-term rating on the U.S. within two years.
“Because the U.S. has, relative to its AAA peers, what we consider to be very large budget deficits and rising government indebtedness, and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable,” S&P said in a news release.
To which the chorus should say, Amen.
Will the triple-A credit rating of the world’s richest nation actually fall? It should not, of course. But it probably will if Congress continues to refuse to raise as much money as it spends.
The Republican deficit-cutting plan that the House passed last week wouldn’t help. It not only does nothing to increase federal income, but actually proposes large additional tax cuts for wealthy individuals and corporations. Additional tax cuts would reduce federal revenue making it that much more difficult to reduce the deficit — that’s third grade math, folks.
The House bill will be rejected by the Senate and any revenue-reducing bill that did pass both houses would be vetoed.
President Obama proposes to increase taxes on the wealthy and has embarked on a speaking tour to sell his plan. But taxing the wealthy won’t bring the deficit down fast enough to restore investor confidence. Taxes should also rise for the upper ranks of the middle class — or, to sweeten the rhetoric, the middle class should be redefined so that taxes can rise a bit on those in the $150,000 to $250,000 annual income range, as well.
Spending also should be cut, of course. But that argument doesn’t have to be made. Both Democrats and Republicans agree that spending must be reduced. The more reasonable among them also agree that the cutting should be done carefully so that the economic recovery now slowly under way is not stopped dead in its tracks.
STANDARD AND POOR’S did the nation and the world a favor with its warning. The company is, after all, a businessman’s business. It flourishes when Wall Street flourishes. Its own vested interests are the same as those of the world’s most successful corporations. It has every reason to want the United States to continue to be banker to the world.
So when it issues a credit warning to Washington, D.C., and says it can see no reason to believe Congress will meet its fiscal challenge, the anti-tax right should sober up and listen. This is a warning from one of their own. Here is a capitalist’s capitalist saying, “Hey, dummies, listen up. There are two ways to reduce the deficit: increase income, reduce spending. It takes both. Just do it!”
— Emerson Lynn, jr.
