Shooting The Stalking Horse

by JASmius

Ya hafta admit, folks, if this is all the grand, conspiratorial kabuki theater that Glenn Beck thinks it is, then Senate Donks in the role of star chamber-esque grand inquisitors of the credit rating agency that finally (if tepidly) slammed the brakes on their eternal spending spree is GREAT casting:

The U.S. Senate Banking committee has begun looking into last week's decision by Standard and Poor's to downgrade the U.S. credit rating, a committee aide told Reuters.

The aide said the panel was gathering information about the S&P move but no decision had been made on whether it will hold hearings into the downgrade.

While an official investigation has not been launched, the aide said that all options were being weighed....

Senate Banking Committee Chairman Tim Johnson, in a statement, called S&P's downgrade an "irresponsible move" that could have a far-reaching impact.

The Democrat said the downgrade may "have spillover effects that tax the American people by increasing interest rates on home loans, credit cards, and car loans, and by increasing the cost of finance for some state and local governments."

Oh, yes, because it's SO irresponsible to take a timid swipe in the direction of actual fiscal responsibility, but the picture of good fiscal stewardship to continue spending the country into oblivion. Kind of like the old saying about nobody beats up my kid brother except me, only substituting taxing for beating. And, you know, putting their god & savior's re-election bid in even more peril than it was in already.

Which isn't to say, in all fairness, that House Republicans were completely thrilled about S&P's overly bipartisan approach to their mild rebuke:

S&P also came under attack from House of Representatives Majority Leader Eric Cantor, a conservative Republican who has been outspoken in his opposition to tax increases.

In a memo to his fellow Republicans that was made public by his office, Cantor noted that S&P's analysis of the U.S. fiscal situation "is overly focused on resolving the debt crisis in a manner that would greatly worsen the jobs crisis."

He was referring to S&P's contention that "the majority of Republicans in Congress continue to resist any measure that would raise revenues" to help ease the country's fiscal problems.

Now THAT's a good point. But y'all already know that tax increases both further depress economic activity and never raise the magnitude of revenue predicted because of this little detail of people not wanting to pay higher taxes and either sheltering their income or simply deferring or declining money-making (and therefore job-creating) ventures. Or what supply-siders know as "disincentives to work and save".

But when it comes to wrist-slapping, S&P is apparently on a roll, almost as if they like downgrades a little too much:

Standard & Poor’s lowered the AAA ratings of thousands of municipal bonds tied to the federal government, including housing securities and debt backed by leases, following its August 5 downgrade of the U.S.

The rating company assigned AA+ scores to securities in the $2.9 trillion municipal bond market including school- construction bonds in Irving, Texas; debt backed by a federal lease in Miami; and a bond series for multifamily housing in Oceanside, California. Olayinka Fadahunsi, an S&P spokesman, said he couldn’t provide a dollar figure on the affected debt.

S&P also cut ratings on securities backed by Fannie Mae and Freddie Mac, prerefunded issues and munis repaid by using federal assets, also known as defeased or escrow bonds. No state general-obligation ratings were affected and the company said some may remain unchanged.

“It’s expected, but nobody is happy about it,” Bud Byrnes, chief executive officer of Encino, California-based RH Investment Corp., said in a telephone interview. “No one that I know thinks it was justified to cut the U.S. bonds to AA+. Once that happened, you knew that any prerefunded bonds or escrowed bonds would be downgraded too. It’s a domino effect.”

Um, are you sure you want to use that particular metaphor, Mr. Byrnes? Seems a little...pregnant to me.

Hey, I said S&P might be getting a little carried away; I didn't say they weren't justified. Frankly, I don't think you want to see us get what we REALLY deserve.

At least not unless it leads to Red Barry getting what HE really deserves.

I'd rate that one AAA, myself.

[cross posted at Hard Starboard]