Revenge of the Middle
The S&P downgrade is the beginning of the end of the left-right war. And both sides will lose.
If you're an American, you probably fall into one of three categories. You're a passionate, confident liberal who reliably votes for liberals. Or you're a passionate, confident conservative who reliably votes for conservatives. Or you're a moderate who, lacking confidence or passion, doesn't reliably vote.
Over the years, politicians have evolved to fit this divided electorate. Republicans cater to the right. Democrats cater to the left. Nobody caters to the middle, because the middle doesn't put its foot down.
Until now. A centrist constituency with real power is finally emerging. It isn't a party or a movement. It isn't even American. It's our creditors. The people from whom we borrow the money to live a deluded life of entitlements and tax cuts are telling us that the party is over.
When comparing the U.S. to sovereigns with 'AAA' long-term ratings that we view as relevant peers—Canada, France, Germany, and the U.K.—… the trajectory of the U.S.'s net public debt is diverging from the others. … in contrast with the U.S., we project that the net public debt burdens of these other sovereigns will begin to decline, either before or by 2015.
In other words, it's safer to invest in these countries than in us. If investors agree, there goes our gravy train. To keep borrowing money, we'll have to pay higher interest. Loans will become more expensive, the economy will slow, and our debt will increase in a vicious circle. No anti-tax or Medicare-protection pledge will stop this merciless strangulation.
Our politicians, still catering to the right and left, are reacting to the downgrade by blaming each other. They aren't getting the message. The debate between higher taxes and deep entitlement cuts is over. Our creditors are going to make us do both.
The $2 trillion deal we just agonized over is peanuts. S&P projects that U.S. debt will reach 85 percent of our gross domestic product within a decade, and we're approaching an "inflection point on the U.S. population's demographics and other age-related spending drivers," which will accelerate our insolvency. In case you missed the implicit message of "demographics" and "age-related," the company spells it out: Last week's debt agreement "envisions only minor policy changes on Medicare and little change in other entitlements, the containment of which we and most other independent observers regard as key to long-term fiscal sustainability."
Translation: Medicare will be cut deeply, no matter what Democrats say.
But that's only half the story. S&P says it also revised its rating because its projection "now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues …"
Will Saletan covers science, technology, and politics for Slate and says a lot of things that get him in trouble.
Photograph of the New York Stock Exchange by Stan Honda/AFP/Getty Images.