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Friday, August 5, 2011


It's actually a little hard to get one's mind around a credit downgrade of the United States. The fact that the US was a AAA credit was always something you could count on without really thinking about it, like the earth beneath our feet or the fact that the sun would rise in the East every morning.

The world's one remaining superpower is not even a triple-A nation anymore?

Two days ago the New York Times ran an article on the front page of their business section in which they essentially pooh-poohed the importance of such a downgrade, likening it to a typical corporate downgrade from AAA to AA. They quoted one executive as saying it was "like going from a Rolls Royce to a Mercedes." Put in those terms, of course, it doesn't sound so bad. After all, Rolls Royces represent the kind of conspicuous consumption we're all taught is in bad taste. And who wouldn't be happy to drive a Mercedes?

But that analogy is ridiculous. Having the debt of this country downgraded has nothing to do with flashiness and everything to do with fiscal responsibility. No CEO in his right mind would borrow forty cents of every dollar he spent, with no plan to ever change that ratio. But that's what Congress and this President (and, to a slightly lesser extent, the previous President) have done. The basic problem is, a politician's main job is to get reelected, so he has no incentive to think more than two, or four, or six years in the future.

Certainly few people in the federal government right now seem to be thinking about the long term.

It's hard not to wonder if we haven't just taken the first step on the road to junk bond status, and by implication, junk nation status.

But hey -- that might  not be so bad. It's just a little like going from a Mercedes to a Corolla. And, really, Mercedes are so nouveau riche and flashy. Corollas are for people with good values.


Anonymous said...

The single best way to restore national fiscal and economic status would be establish a "Corolla" health care system - competitively priced, affordable to all, reliable, and does the job for all the family. Right now everyone wants a Humvee - and someone else to pay for it.


John Craig said...

That would certainly be a great start.