My new piece asks a question that keeps coming up as I talk to politicians: So, uh, what happened to our fears that the S&P downgrade, or any credit rating downgrade, would bollix up the economy? The reasons are simple, as are the effects of the non-panic: Less and less interest in any kind of tax or spending reform that cuts against political self-interest.
You should also read this fascinating Reuters story that explores the same theme. The fact that S&P didn’t send us plummeting into Tartarus has helped Washington get back to horrible, horrible normalcy.
Tim Ryan, a Democrat on the House Budget Committee, said there was broad sentiment in Congress that the U.S. economy would not necessarily suffer from a downgrade by the other two big agencies – Fitch and Moody’s – that still rate U.S. debt as AAA.
Ryan cited the role of the three major agencies in the buildup to the 2008 financial collapse, when they gave AAA ratings to the toxic mortgage-backed securities at the heart of the crisis.
Since then, Ryan said, “the credit rating agencies have lost a tremendous amount of credibility. The U.S. is still the safest investment to make” – meaning another downgrade may have little influence how investors view U.S. debt.
Fool me once, okay, I’ll create a debt commission. Fool me 37 times, and you can take your downgrade memo and stick it where the Bloomberg TV lighting doesn’t shine.