Here are some bits from a NY Times op-ed by Paul Krugman:
To understand the furor over the decision by Standard & Poor’s, the rating agency, to downgrade U.S. government debt, you have to hold in your mind two seemingly (but not actually) contradictory ideas. The first is that America is indeed no longer the stable, reliable country it once was. The second is that S.& P. itself has even lower credibility; it’s the last place anyone should turn for judgments about our nation’s prospects.Go read the whole article.
Let’s start with S.& P.’s lack of credibility. If there’s a single word that best describes the rating agency’s decision to downgrade America, it’s chutzpah — traditionally defined by the example of the young man who kills his parents, then pleads for mercy because he’s an orphan.
America’s large budget deficit is, after all, primarily the result of the economic slump that followed the 2008 financial crisis. And S.& P., along with its sister rating agencies, played a major role in causing that crisis, by giving AAA ratings to mortgage-backed assets that have since turned into toxic waste.
Nor did the bad judgment stop there. Notoriously, S.& P. gave Lehman Brothers, whose collapse triggered a global panic, an A rating right up to the month of its demise. And how did the rating agency react after this A-rated firm went bankrupt? By issuing a report denying that it had done anything wrong.
So these people are now pronouncing on the creditworthiness of the United States of America?
The truth is that as far as the straight economics goes, America’s long-run fiscal problems shouldn’t be all that hard to fix. It’s true that an aging population and rising health care costs will, under current policies, push spending up faster than tax receipts. But the United States has far higher health costs than any other advanced country, and very low taxes by international standards. If we could move even part way toward international norms on both these fronts, our budget problems would be solved.
So why can’t we do that? Because we have a powerful political movement in this country that screamed “death panels” in the face of modest efforts to use Medicare funds more effectively, and preferred to risk financial catastrophe rather than agree to even a penny in additional revenues.
The real question facing America, even in purely fiscal terms, isn’t whether we’ll trim a trillion here or a trillion there from deficits. It is whether the extremists now blocking any kind of responsible policy can be defeated and marginalized.
I find the US a perplexing place. In their Declaration of Independence they set high ideals of "all men are created equal" but their Constitutional Convention squabbled over slavery and how to allocate votes to slave holders for the "non-persons, i.e. their slaves". They came up with 3/5 of a vote for each piece of property. (One wonders why there weren't votes for acreages and houses and factories!)
As a kid I watched as poisonous Southern Democrats (who have morphed into the Bible Belt Republicans of today and the leading Tea Party fanatics) stood at the school doors and denied entry to black students saying that "over my dead body will this black child be allowed an education". These are the fanatics who have the US by a stranglehold today. And you can thank Richard M. ("I am not a crook") Nixon for this because his Southern Strategy is what delivered the hate-filled south to the Republican party.
I would love to wipe my hands of the US and say "let the Devil take you" but unfortunately the US dominates Canada. Our politicians have to kowtow to Washington's whims and our economy is very, very dependent on the state of the US economy. So I have to worry. The right wing nuts in the US have their hands about my throat and when they threaten to take the US down in a default on its bonds, they are pulling me (and Canada) under with them. Oh how I wish I could break free from the evil dominance of the US and its poisonous politics.