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August 09, 2011 2:40 PM BBA won’t get AOK from S&P

By Steve Benen

I’m not impressed with Standard & Poor’s decision to downgrade U.S. debt as a matter of political punditry, but at least the agency knows better than to endorse the Balanced Budget Amendment (one of the worst ideas in the history of bad ideas).

House and Senate Republicans have rallied around the notion of a balanced budget amendment to the Constitution as a solution to the country’s dire fiscal straits. But over the weekend, the head of Standard & Poor’s sovereign ratings division dismissed the idea, arguing that it would be more harmful than helpful to the country’s creditworthiness.

“In general, we think that fiscal rules like these just diminish the flexibility of the government to respond” to crises, S&P managing director John Chambers told CNN’s Wolf Blitzer on Saturday when asked whether it’s important that Congress send a balanced budget amendment to the states in order to restore the country’s AAA credit rating.

The S&P official did not comment specifically on any of the various versions of the proposed constitutional amendment, but said the idea itself “would just reduce your flexibility in a crisis,” adding that there’s not much to be said for Congress “trying to bind itself with various rules.”

That’s really just the start of the problems with this proposed amendment, but I’m glad S&P noticed.

Indeed, John Chambers’ comments have some political relevance. In the wake of the downgrade, some of the less-sensible members of Congress have pushed even harder for the ridiculous idea, using the S&P’s analysis to justify the alleged need for the amendment. It helps to have an unequivocal assessment like “diminish the flexibility of the government to respond” to crises.

Also note, many Republican leaders, including Senate Minority Leader Mitch McConnell (R-Ky.), have prioritized lawmakers “impressing” Standard & Poor’s. Well, Mitch, S&P doesn’t want a balanced budget amendment.

With this in mind, maybe Republicans can drop the constitutional nonsense and work on meaningful economic policy for a change?

Steve Benen is a contributing writer to the Washington Monthly, joining the publication in August, 2008 as chief blogger for the Washington Monthly blog, Political Animal.

Comments

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  • Ralph Kramden on August 09, 2011 3:00 PM:

    Hey, about this balanced budget amendment (or Cut Cap and Balance) - now that Town Meeting season is in full swing, will someone (preferably in the press, but not necessarily) ask one of these Republican Congressmembers why they need an amendment?

    They're Congress! They get to originate the budget! They don't need no steekin' amendment! They can just propose a balanced budget and vote on it!

    So - put up or shut up. Though they will undoubtedly do neither.

  • Joe Buck on August 09, 2011 3:00 PM:

    I'm disappointed that you would pursue this line of argument. S&P has no credibility, and they should not be given a veto over American politics even if, on some issue, they are on "our" side (e.g. against a balanced budget amendment).

    Their downgrade has already been discredited by the market, which has demonstrated in the last few days that investors simply do not believe S&P. If you trust a rating agency, when the rating of a debtor declines, investors sell bonds issued by that debtor, they don't buy more. But the market dumped stock and bought treasuries. My guess is that the market thinks that the "downgrade" will just help cement the focus on austerity, which means no recovery and probably a new recession, which will be bad for corporate incomes and therefore stocks, but treasuries are backed by the full faith and credit of the US government which is still a whole lot safer.

  • walt on August 09, 2011 3:05 PM:

    Congressional Republicans don't give a damn about governing. They care about winning. Perversely, they shall probably be rewarded for this nihilism next year at the polls.

  • JEA on August 09, 2011 3:10 PM:

    Wasn't this blog full of dire warning from Wall St before the budget deal? Didn't seem to affect conservative ideology at all. Republicans are listening to business about as well as they're listening to Democrats.

    It doesn't really matter whose mouth it comes out of, conservatives are not going to listen to anyone who disagrees with their Gospel.

  • anonymoose on August 09, 2011 3:30 PM:

    So...is S&P the new OMB?

  • square1 on August 09, 2011 3:40 PM:

    Why in God's name are democrats dignifying S&P's views on anything?

    At best, S&P is horrifically incompetent. At worst, they are launching partisan political attacks against Democrats.

    What does S&P think about the BBA? I. Do. Not. Care.

  • Texas Aggie on August 09, 2011 4:02 PM:

    maybe Republicans can drop the constitutional nonsense and work on meaningful economic policy for a change?

    Why on earth would they want to do that? You almost act like you think the republicans give a flip about how well the US works. Let me explain something to you. Read JEA's post. Then get it tattooed on the inside of your eyelids to remind you every time you harbor the completely ridiculous notion that the republicans are sane people that they are the kids who destroy their own birthday cake because if they can't have it all, then no one is going to have any of it.

  • ohhenery on August 09, 2011 4:59 PM:

    CNN asks S&P to restore AAA with BBA?
    so very Wolf Blitzer

  • LJL on August 09, 2011 8:33 PM:

    All these people yearning for the BBA, should try out the BBL. The Balanced Budget Law would absolutely outlaw anyone from taking out a loan for whatever reason that they do not repay in full within the fiscal year. So no matter what, mortgage, car loan, student loan or medical expenses if the loan is not paid off in full within the year the debtor goes off to debtors prison after giving up all his other assets. If the average right wing voter adapts to the BBL and debt disappears completely from the private sector then maybe the BBA could be discussed.

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