President Obama's and the Tea Party's Political Tombstone

As we all knew from the moment when President Obama demanded higher budget cuts than John Boehner could deliver, given the "no new taxes" stand of the Tea Party on his GOP’s right wing, the United States has lost its triple-A credit rating from Standard & Poor's.

It is a dramatic embarrassment and condemnation for the world's largest economy.

S&P cut the long-term U.S. credit rating by one notch to AA-plus on concerns about growing budget deficits.

"The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics," S&P said in a statement.

"More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18," the statement said.

S&P warned U.S. officials that if they did not cut spending by $4 trillion, the rating would be at risk. Congress and Obama, who squabbled for days, had great difficulty in agreeing to cuts of $2.1 trillion.

The downgrade came after a Friday afternoon of news leaks, during which Standard & Poor's told the U.S. government that it was going to downgrade the U.S.'s triple-A credit rating and U.S. officials notified S&P that it had made a $2 trillion mathematical error.

The error was in the calculation of the U.S. debt-to-GDP ratio over time and was based on a misreading of what the correct congressional baseline was, according to government sources. They said that once informed of the error S&P revised its rate-cut rationale to emphasize the political aspects of the country's debt situation.

David Beers, who is the head of sovereign ratings at S&P, acknowledged that the agency's decision was highly influenced by the change in Washington's "political dynamics" that hampered members of Congress from reaching a more comprehensive plan to cut the deficit.

"From the standpoint of fiscal policy, the process has weakened and became less predictable than it was," he said.

In other words, part of the reason it downgraded the U.S. was because of the debt ceiling feud in Congress.

As its answer, and still in full denial, a US Treasury spokesman said, "A judgment flawed by a $2 trillion error speaks for itself."

In short, dear readers, the debt ceiling debacle has led directly to the calamitous lowering of America’s debt rating. There is no need to look farther for a reason. If the members of Congress and the President had done their jobs professionally, the rating would still be AAA. Instead, AA+ is the epitaph on their collective tombstone.

The most troubling aspect of the entire affair is that, instead of addressing the reasons for the downgrade, the United States Treasury has taken the position that it was downgraded because of mathematical errors made by S&P. (We have yet to hear from the President, perhaps because it is not an important matter for him?)

Of course, S&P math errors are not the reason. The reason is that America has far too much debt, both short and long term, and it has no plan whatsoever to deal with the problem and no political will to overcome partisan politics in order to lower the debt.

Let’s hope that America has not had its tombstone epitaph written, too, on Friday, 5 August 2011.

PS: U.S. Treasury bonds, undisputedly seen as the safest investment in the world, are now rated lower than bonds issued by countries such as the UK, Germany, France or Canada.