The meme of the week, that the Standard & Poor’s downgrade of the United States’ sovereign credit rating was caused by the Tea Party, is absurd.
First, S&P and its rating system are irrelevant. This is the same ratings agency that gave A ratings to Lehman Brothers and other teetering banks right before they crashed and burned in 2008.
Second, that S&P would have allowed a country with the debt problems the U.S has — a deficit of $1.4 trillion and a debt of $14 trillion (or really more than $200 trillion when all “entitlements” are included) — to maintain a AAA rating demonstrates that its ratings aren’t grounded in reality.
Finally, the Tea Party elected candidates to Congress who promised to return the U.S. to Constitutional governance and tackle the country’s spending problems. This deal doesn’t do that, and it even goes so far as to create an unConstitutional “super committee” to ram through more spending and tax increases.
S&P warned going into the debt-ceiling discussions that if spending wasn’t tackled, a downgrade was coming. It followed through with its promise.
But rather than tackle spending, Congress continued business as usual. So the downgrade is a “business-as-usual” downgrade, and the market responded by demonstrating what it thought of the deal.
But it doesn’t really matter. I’ve written before that the U.S. really has no debt. And although this statement has been met with ridicule from some people who don’t understand U.S. finance, none other than former Federal Reserve Chairman Alan Greenspan confirmed Sunday what I have said for years.
“The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default,” Greenspan said on NBC’s Meet the Press.
If you can print money to infinity, then you have no debt. Unfortunately, if we lived by the same financial rules as government, we would be put away for a dozen lifetimes.