Washington Wakes To The Downgrade — And Does Nothing

Business Insider
August 8, 2011

Tens of thousands of congressional staffers, government employees and K-street lobbyists begin their first work-day after Standard and Poor’s downgraded the United States Friday, but elected officials — including the one occupying the White House— are nowhere to be found.

Politicians of both parties are escaping the DC heat and humidity for the month-long August recess, while President Barack Obama is scaling back his public event schedule as his campaign continues fundraising activities.

The S&P action has done little to change the political reality in the near term — that Congress is taking a vacation while leaving half-a-dozen jobs bills and the federal budget incomplete. And for the next month, there will be no response from Washington other than the blame game.

Neither party is quite sure how the public is reacting to news of the downgrade, with Republicans criticizing Democrats, and Democrats criticizing S&P.

For Obama the downgrade is a massive liability, as he is the most visible member of a government now deemed to be at some risk of not meeting its obligations. Republicans are on the hook for their opposition to tax reforms, cited by S&P as a key factor in the decision to strip the U.S. of its ‘AAA’ rating.

Looking ahead, the downgrade puts new pressures on the “Super Committee,” created less than a week ago to cut $1.5 trillion from the deficit, to exceed its goal by as much as $2 trillion to meet the S&P’s target.

Hopes for the bipartisan group dimmed last week, as Republicans and Democrats waged a public battle over the need for revenue-raising reforms and whether to include entitlement spending as part of the discussions.

S&P said it doubts that a serious attempt at either will succeed. Ratings officials even threatened a second downgrade if the committee failed to meet its statutory requirements, despite the triggered cuts that would take effect.

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