April 22, 2011
Is the world headed for a debt crisis to dwarf the one that befell us in 2008, when Treasury Secretary Hank Paulson stood aside and let Lehman Brothers crash?
No one knows for certain. As Yogi Berra said, “it’s tough to make predictions, especially about the future.”
But the probability of a financial crisis increased this week after President Obama’s trashing of Rep. Paul Ryan’s deficit reduction plan as dragging us all back to the Dickensian days of “Oliver Twist.”
For the savagery of Obama’s attack persuaded Standard & Poor’s to begin to move to downgrade U.S. sovereign debt from the triple-A rating it has held since Pearl Harbor.
The British newspaper The Guardian wrote of the dramatic news:
“With the political infighting between the Republicans and Democrats on the deficit now so bitter that there was a risk of the US government being shut down earlier this month, S&P said it had taken the decision to change its outlook because ‘the path to addressing these issues is not clear to us.”
“We believe there is a significant risk,” said S&P credit analyst Nikola Swann, “that congressional negotiations could result in no agreement on a medium-term fiscal strategy until after the 2012 congressional and presidential elections.”
Obama adviser Austan Goolsbee challenged the S&P rating and rationale behind it. “They are saying their political judgment is that over the next two years, they didn’t see a political agreement. … I don’t think that the S&P’s political judgment is right.”
But the S&P’s projection of gridlock got support this week when two polls showed that the nation is much closer to Obama’s resistance to Ryan’s plan than it is to Ryan.
A Washington Post-ABC News poll found 78 percent of Americans oppose cutting spending on Medicare to reduce the deficit, and 69 percent oppose cutting Medicaid. Obama’s plan to raise taxes on couples earning $250,000 a year or more wins the support of 72 percent of voters.
A McClatchy-Marist poll found 2 in 3 Americans favoring raising taxes on those earning more than $250,000 but 4 in 5 voters opposing cutting Medicare or Medicaid.
Obama’s position is in sync with three-fourths of the nation.
Why would he retreat from this unassailable high ground to seek a compromise with a hugely unpopular Republican proposal? Why not pound the Ryan Republicans remorselessly as defenders of the rich and slashers of the social safety net if America agrees with you?
Obama may have found an issue to save his presidency.