How the GOP just screwed us all
August 5th 2011
You may have heard about the discussions they had in Congress over the past few weeks about the credit-limit negotiations so the US wouldn’t default, and thus would avoid the hideous expense and chaos that would come from having the credit rating of the country reduced. Everyone agreed that this was of paramount importance, even though the debate never needed to happen in the first place.
The fascists of the GOP wanted to bludgeon the country into ceding a lot of the gains made since about 1870, and extorting concessions, using the credit rating as a Lindbergh baby, seemed to fit the bill. So Obama gave up the store, and saved the country from default, and credit downgrading.
Well, funny thing.
It seems the economic powers that be weren’t amused by the Republicans making a political football out of America’s credit-worthiness.
I described it on Professor Scott Erb’s excellent “World in Motion” blog (http://scotterb.wordpress.com) as follows:
“Imagine you’re a friendly neighborhood banker. (Let’s call you Mr. Potter). You’re walking along the street, and you pass a house you hold the note on. The husband and wife are out front, shouting at one another, and the wife is saying that if the husband doesn’t buy her a new car, she’s going to blow off next month’s mortgage payment and wreck his credit rating. She doesn’t even seem to care that you are standing right there and can hear all this.
“So, Mr. Potter, what is your thinking when the husband turns up a few days later requesting a car loan?”
The process, which the Guardian called “shambolic,” made a world already teetering on an economic precipice even more twitchy and nervous. The world markets had lost over $2.5 trillion in value over the previous 10 days’ sessions, 80% of it in the US alone. Even the jobless figures this morning, a faint ray of light in an otherwise dismal economic landscape, failed to staunch the bloodletting.
Enter our hero of the Republican Revolution against America, Mitch McConnell. Looking, as usual, like a Teenage Mutant Ninja Turtle wax dummy that had been left out in the Oklahoma sun, old Mitch assured the world—including the panicky and reeling markets, and intently watching credit agencies—that the Republicans were going to pull the same shit the next time the credit-limit extension came up for a vote.
At that point, the only question remaining wasn’t if, but simply when the credit agencies would lower America’s Triple-A rating. I figured it would be a couple of weeks, but it was coming.
Standard and Poors wasn’t going to wait that long. After all, the Republicans had just successfully turned America into the world’s biggest flake.
So, as soon as the last of the markets had closed for the weekend, S&P acted, and lowered the American credit rating to Double-A Plus, the first rung down on the ladder.
America, the world’s richest country, supposedly, now has a credit rating lower than that of the Isle of Man. That’s not meant to disparage Mann, or in Manx, Ellan Vannin, which has had the same government for 1,032 years. However, as economic collossi go, the island, with 80,000 people, isn’t exactly top tier.
But it’s in better shape than America is right now, and going to stay that way for quite some time.
The Dow already lost 1,300 points over the past fortnight. Don’t be surprised if it loses a couple of thousand more over the next two weeks. The change in credit-worthiness is a body blow to an already fragile economy.
Interest rates will be forced up. Even if the prime only goes up a half a point, that translates to 725 BILLION in extra interest payments per year, each and every year. That’s what half a point on 14.5 trillion adds up to.
Put it this way: the agreement the Republican Teabaggers extorted out of Obama and the country would supposedly reduce government spending by $2.5 trillion over the next ten years.
We just lost all of that fake gain over the next 3 ½ years. Only where most of the government spending would have been on the American people (those social service programs the fascists of the GOP hate so much), all of the added interest will go to the financial sector and international banks, and be of absolutely no benefit to the American people.
And that’s assuming only a half a percent rise. That isn’t certain. It could be more.
Then there’s the ripple effect. With over 20% of the country out of work, higher interest rates mean it’s harder for businesses to grow (not that they’ve been doing any of that anyway, especially amongst the major corporations, which have a net job loss going back to 11 years ago), and of course, the nearly moribund housing market will take another hit, as will those with ARMs who have managed to hang on to their homes for the past 4 years of dislocation.
Higher credit ratings will also impact the States. They were already bracing for a lot of Federal dollars to go missing as the extorted spending cuts kicked in, but the worst of those was still a couple of years off. A lot of the states were teetering on the edge of default, and this could push them over.
That, in turn, could damage the US credit rating even further.
It doesn’t help that much of Europe is also in dire straits. Most of them have embraced the same sort of austerity plan (“Man the lifeboats! Bankers and investors first!”) that the Teabaggers have forced us to do to ourselves, and a possibility exists that by the end of summer, several countries may be bankrupt, and the Euro will have collapsed.
At which point, we can all stop pretending it’s just a recession and call it what it is: The Second Great Depression.
It doesn’t help that the country is still in the grip of economic interests only interested in wringing every last dime from us before they move on to greener pastures (they like to pretend there will be greener pastures, and aren’t starting a conflagration that will consume them, as well).
The other day, I was amused to note that the latest quirk in the Citizens United law which the Supreme Court used to transfer sovereignty from the American people to the corporations was one sleazy outfit that donated $1 million to Mittens Romney—and then promptly disbanded, leaving no trace of who was behind it. Was it the Church of the LDS? Or maybe some outfit looking to overturn the Constitution? Who knows?
Expect to see more of that. The Nation had an amusing article about ALEC, the right wing outfit that has ghostwritten many of the more vicious and “business-friendly” laws that states have enacted in recent decades. Remember all those draconian “three strikes” laws, and other laws for mandated sentencing and ever higher penalties for smaller and smaller crimes? The result of which was that America has more prisoners then all the rest of the world combined, excluding China? Those laws?
Seems that ALEC controls a huge chunk of America’s prison industry network, which involves hundreds of thousands of prisoners working for twenty cents an hour to produce things. Until recently, they could only sell to the government, since the effectively slave labor (all other costs externalized to the state and federal prisons!) was regarded as unfair competition. But ALEC fixed that: they got legislation through letting this ultra-cheap prison labor produce goods that could be sold in the domestic retail market. In other words, America has the world’s biggest slave-labor camps, and we are underwriting all of it except 5% of the labor costs in order to undercut ourselves, the way we did with globalization.
Is it any wonder that even before the Teabaggers and other racketeers came along, we were all struggling?
About the only thing that can save America from the worst of this is to get rid of the corporate control of government by any means possible, and revolt against the banks. Not violently—that wouldn’t work and would just make things worse. But a fiscal revolt is needed. If you want to get rid of these powerful and vicious parasites, the ones who control the teabaggers and the GOP and most of the Democrats, you’ll just have to stop payment. Stop feeding them. What can they do?
Otherwise, things will just get worse and worse until America is the next Bangladesh.
In any event, any hope we had of getting out of the economic mess without having to go through a Great Depression has now ended.
Good luck to all of us. We’ll need it.