Debt Cynicism

Lynne Kiesling

That’s the constant in my assessment of the political theater of the past two weeks — so much sound and fury, and the federal government’s debt rating is still likely to be downgraded. And it deserves to be downgraded, and probably should have had that happen a while ago. I mean, seriously, what credit score do you think the federal government should get if it went to “The fisc” has not been sustainable for a decade, and only marginally so before that.

Moreover, this deal does not moves us toward sustainability; it does not cut spending, as you see here and here. The dirty little addiction secret in federal budgeting is the baseline, and despite hand-flapping Keynesian hyperbole over the past few days (I’m lookin’ at you, Mr. Krugman), this deal still constitutes spending increases over the next decade. That’s why I think a credit rating downgrade is inevitable, because the majority of the American public, those they elect to represent them, and the breathless, melodramatic media are getting what they want. Good and hard. Problem is, the rest of us who understand living within our means at a micro and a macro level, and behave accordingly, are also getting what the others want.

True, the rating agencies are damaged goods because they did such a craptacular job of assessing risk in new debt instruments around mortgages. In this case as in that one, they do have muddled incentives, because the people who hire them and pay their salaries are the players in the “crony corporatism” that characterizes the relationship between the federal government and big business. But if Congress is going to continue abrogating its long-term fiscal responsibilities, the interest rate effects of financial market movements and of the rating agencies are the only even-somewhat-credible discipline that we can expect.

If this doesn’t provide enough evidence to you that we need to take as many important decisions as possible out of political processes and return them to individual processes, you haven’t been paying sufficient attention.

At least Gabrielle Giffords brings some dignity and courage to this ugly process, and I honor her strength. If Joe Biden weren’t so mean, petty, and small-minded as to use “terrorist” rhetoric in political debate, perhaps he could learn a lesson from her as a role model. I’m not holding my breath on that.

The only silver linings I see here are the reining in of some defense spending, and the fact that we actually almost-sort of-kind of had a substantive debate on spending and debt. My inner optimist has to cling to those, because my inner cynic has so much other fodder.