Credit Downgrade Becomes Political Football
A ticker in Times Square gives the news Friday evening about S&P downgrading the U.S. credit rating. Photo by Andrew Burton/Getty Images.
The intensity and scale of the Obama administration pushback against Standard & Poor’s downgrading of America’s credit-worthiness from AAA to AA+ has been swift and severe.
So, too, are the potential consequences.
The immediate concern for the administration is how the stock market reacts Monday to a downgraded America.
“I think S&P has shown really terrible judgment and they’ve handled themselves very poorly,” Treasury Secretary Timothy Geithner told CNBC’s John Harwood Sunday night in an attempt to soften the blow at the New York Stock Exchange. “And they’ve shown a stunning lack of knowledge about basic U.S. fiscal budget math. And I think they drew exactly the wrong conclusion from this budget agreement.”
Geithner also explained why he reversed course and now intends to stay at his post through the president’s re-election campaign.
“I believe in this president,” he said. “I believe in what he’s trying to do for the country. I love my work. And I think if a president asks you to serve, you have to do it. And we have men and women dying to protect the country in Afghanistan. We have unemployment above nine percent. Still trying to heal the scars of this crisis. We have a lot of work to do.”
After the White House finished bashing S&P’s $2 trillion math error and reminding every reporter that this was the same credit rating agency that missed the boat on mortgage backed securities that helped send the country into recession, the Obama administration pointed out that S&P was primarily making a political statement, not a fiscal one.
And, in part, that is certainly true.
“The political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed,” read the S&P release, in part, on Friday night.
The New York Times reports that some in Congress see the downgrade as the impetus for a bipartisan, big deficit reduction package to emerge from the Joint Committee of 12 created by the recent debt deal.
The longer term concern at the White House about the downgrade, which also helps explain the full-court press in pushing back, is that of the president’s re-election campaign.
Being the first president to oversee a downgrade in America’s credit worthiness on your watch is a pretty easy line to write into a 30-second television ad.
President Obama’s senior campaign adviser and former White House adviser David Axelrod took to the Sunday morning airwaves to place the blame elsewhere.
“The fact of the matter is that this is essentially a tea party downgrade. The Tea Party brought us to the brink of a default, and by the way, you said before – well the president said this wouldn’t — if we had defaulted on our debt the consequences would have been dramatic and lasting. And so it was the right thing to do to avoid that default. It was the wrong thing to do to push the country to that point. And it’s something that should never had happened. And that clearly is on the backs of those who were willing to see the country default, those very strident voices in the Tea Party. And by the way Bob, let me say one other thing – not one of the Republican presidential candidates stood out in opposition to that. Not one of them said let’s compromise and be responsible about this.”
Every major Republican presidential contender bemoaned the downgrade over the weekend and placed the blame for it squarely at President Obama’s feet.
Republican frontrunner Mitt Romney plans to continue to hammer away at it Monday in New Hampshire. His campaign has been dogged in wisely utilizing every bit of negative economic news to serve as a contrast with the president.
Romney issued this statement ahead of his campaign events Monday:
“When I was governor, S&P rewarded Massachusetts with a credit rating upgrade for our sound fiscal management and the underlying strength of our economy. That didn’t happen by accident. The president’s failure to put the nation’s fiscal and economic house in order has caused a massive loss of confidence that resulted in an embarrassing downgrade. In the Carter era, it was called ‘malaise.’ Under President Obama, it’s called meltdown.”
The Republican National Committee is out with a research document Monday morning titled, “The Obama Downgrade.”
In addition to the potential economic damage the downgrade may cause, the president and his team are now going to be engaged in a “Tea Party Downgrade” vs. “Obama Downgrade” finger-pointing battle over the course of the next 15 months.
THE WALKER REFERENDUM
Wisconsin voters in eight state Senate districts will begin to weigh in Tuesday on a national political story: the proxy war in Wisconsin between the national right and left interest groups over Republican Gov. Scott Walker’s successful effort to strip public unions of their collective bargaining rights as part of his controversial budget fight earlier in 2011.
Six of the Republican state Senators who helped make that controversial policy law are now up for a recall election Tuesday, as are two Democrats next week. And like the fight over the Walker budget this past winter, national groups are doing all that they can to influence the outcome.
If Democrats can win five of the eight races, they can win control of the state Senate, which is currently dominated by Republicans 19-14, and provide a check to an otherwise all-GOP state government in Wisconsin. But beyond that, the outcome of these recall elections will be used, depending on the victor, as evidence that swing voters in a swing state support their agenda.
Scott Bauer of the Associated Press lays out the political context for the elections:
“The votes will provide a new gauge of the public mood about the direction of government eight months after unhappy voters ousted incumbent Democrats and gave conservative Republicans control of the governor’s office and the Legislature. The GOP made similar sweeping gains in other states in the midterm election.
“For Republicans, victory in the recall campaign would vindicate their spending cuts and new business-friendly policies, while raising hopes of President Barack Obama losing next year in a swing state he won by 14 points in 2008. Democrats hope voters believe Republicans have gone too far, especially in attacking workers’ rights.”
Bauer’s story highlights the race between Republican incumbent Luther Olsen and Democratic challenger Fred Clark, in which national labor groups and conservative political organizations are spending hundreds of thousands of dollars on advertising. The Olsen-Clark race could be one of the decisive contests.
But as Chris Cillizza of the Washington Post points out, Democrats could win a narrow majority Tuesday and lose it again next week when Democratic Sen. Jim Holperin faces his own recall election
Tom Tolan and Don Walker of the Milwaukee Journal Sentinel wrote Sunday about how the recall campaigns have attracted political operatives from both parties to the state as well.
Ever since the Des Moines Register came out with its benchmark Iowa poll showing Tim Pawlenty near the bottom of the list, the former Minnesota governor has said he must show strong progress by the Aug. 13 Ames Straw Poll.
However, Pawlenty went a bit further on “Fox News Sunday,” telling Chris Wallace that he expects to be “closer to the front of the pack” when the results are tallied on Saturday.
“We are seeing momentum on the ground. You’re going to see good progress,” he said. “Next Saturday, at the Ames Straw Poll, the proof will be in the pudding. And I think you’ll see our campaign moving up from back of the pack to closer to the front of the pack.”
How the press reports and characterizes a distant second- or a third-place showing could help determine for his path for the Republican nomination.
As you can tell by the profile in the New Yorker or by the cover of Newsweek this week, Michele Bachmann will be stealing much of the spotlight in advance of this critical moment in the race.
But it’s Pawlenty who has the most to lose or gain Saturday, and his public expectations setting can do little to lower the stakes at this point.
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