Or as Treasury Secretary Tim Geithner put it in April:
No risk. No risk of that.
Of course, the backlash has already begun. Paul Krugman, writing in the New York Times states:
It’s hard to think of anyone less qualified to pass judgment on America than the rating agencies. The people who rated subprime-backed securities are now declaring that they are the judges of fiscal policy? Really?
What was S&P even talking about? Presumably they had some theory that restraint now is an indicator of the future — but there’s no good reason to believe that theory, and for sure S&P has no authority to make that kind of vague political judgment.
In short, S&P is just making stuff up — and after the mortgage debacle, they really don’t have that right.
So this is an outrage — not because America is A-OK, but because these people are in no position to pass judgment.
Or, as a joint statement from the Federal Reserve, the FDIC, the NCUA, the OCC puts it:
For risk-based capital purposes, the risk weights for Treasury securities and other securities issued or guaranteed by the U.S. government, government agencies, and government-sponsored entities will not change.
So what’s the real problem? Krugman’s position begins and ends with the idea that now is not the time to reduce government spending, because of the perilous state of the rest of the economy. And he may well be right. But that position should not be conflated with the dangerous and destructive idea that debt is good. It is possible to slash the deficit without cutting domestic spending. How about drastically cutting military spending, and using the proceeds for domestic infrastructure? How about raising taxes on the super-rich, the people who gain the most from corporate handouts and the military industrial complex? Because — whatever is about to be done — the problem is excessive debt. Debt transfers wealth from the taxpayer, to the institutional investor and bondholder.