In other words, the GOP's hard line against taxes helped to trigger the downgrade. And for any Republican too obstinate to see this message, S&P issues a further warning: To avoid a second downgrade, we'd probably have to generate "$950 billion of new revenues" by letting "the 2001 and 2003 tax cuts for high earners lapse from 2013 onwards, as the Administration is advocating."
Translation: Taxes will go up, no matter what Republicans say.
Beyond the math, S&P flunks our political system:
[W]e have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration … to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics any time soon. … 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. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy.
There's nothing new in this critique. Impotent windbags like me have bitched about our polarized politics for years. But the critique is no longer coming from impotent windbags. It's coming from the people who control our cash flow. They've watched in dismay as politicians in the debt-ceiling fight played political poker with our creditors' money. They've had enough.
S&P's condemnation of politicians who use the debt ceiling as political leverage clearly applies to congressional Republicans. Throughout the debate, House Speaker John Boehner described a debt-ceiling increase as a favor to President Obama: "He gets his increase in the debt limit" in exchange for meeting Republican demands on spending cuts without tax hikes. After Obama capitulated, Senate Minority Leader Mitch McConnell boasted that the deal "creates an entirely new template for raising the nation's debt limit. … Never again will any president from either party be allowed to raise the debt ceiling … without having to engage in the kind of debate we've just come through."
That's the kind of brinksmanship S&P is talking about. Paying our debts isn't a favor to the president. It's an obligation to our creditors. And if we're going to play poker with their money every time we approach default, they're going to shift their investments to France or Canada.
Politicians, like the rest of us, don't heed such perils until they start to hurt. The S&P downgrade is our first taste of pain. Other credit raters and markets will follow. The only way to limit the pain is to make our country a better credit risk by electing and supporting politicians who put debt control before entitlements and tax cuts.
There used to be many such politicians in Congress: people like Bob Dole, Howard Baker, Alan Simpson, and Lloyd Bentsen. Few remain. Fortunately, one of them has moved on to a more important job: He's the president of the United States. Throughout the debt fight, he's been scorned by the left for seeking consensus on default avoidance and debt reduction, even if it means entitlement cuts without tax increases. In other words, he's doing what S&P says politicians should do. He's willing to lose for the greater good.
I hope the partisans in Congress will join him. If they don't, I hope we elect new people to Congress who think more like him. But if we don't, and if we replace him with somebody who puts tax cuts before debt reduction, that election—the ultimate unfunded mandate—will soon be overridden by the pain of further credit downgrades and interest rate hikes. The middle, in the end, will rule.