The Tea Party Wins - America Loses

Dagong, China's rating agency, had already downgraded the US from a AAA to an A+ credit rating, but yesterday they decided to downgrade our rating again, to A, and place the US on a "negative watch", which means a further downgrade could be coming.  Dagong cited four reasons for the downgrade:

1. "at this crucial juncture, neither the Democratic Party nor Republican Party has shown any consideration for the general interest in order to argue for their own partisan interest; they had a hard time making the correct choice in a timely manner leaving the world in terror, which highlights the negative role of the US political system on an economic basis. This incident will definitely exert its continuous impact on investors’ confidence in US Treasury bonds, affecting the stability of the US debt income."
2. "the fact that the US Congress approves the raising of the debt limit further indicates that the multiple factors affecting the national debt service capability will not change positively in a considerable long term, and that no substantial change will occur to the severe imbalance between the real wealth creation capability and huge national consumption."
3. "The pace of the US deficit cut is far lower than that of new debt growth and the fiscal policy of revenues falling short of expenditures will surely keep pushing the US government debt to a higher level. Dagong predicts that the deficit level of the US government will remain moderately high in the future and the size of federal debt will exceed the GDP by the end of 2012." 
4. "the US Congress has not come up with a positive resolution on how to address the problem of insufficient driving forces for national economic growth, which indicates that the US government cannot resolve the fundamental influence of low economic growth, high deficit and increasingly higher debt to the debt service capability through increasing real wealth creation, with the declining national solvency irreversible. It is natural that QE3 monetary policy will be enabled for the next step, which will throw the world economy into an overall crisis; the status of US dollar will be essentially shaken in this process." 

Essentially, China has said that the insistence by our two-party system to turn basic economic responsibilities into complicated, partisan ideological battles, their unwillingness to work together and come up with a real and effective long-term solution to our increasing debt problems, the lackluster measures they have agreed on to deal with only a sliver of our overall deficit and our overall failure, as a government, to come up with a significant strategy to stimulate job creation, economic growth and real wealth creation that can be used to pay down our deficit and maintain the stability of the US Treasury Bond as an investment vehicle is responsible for our credit downgrading and gives reason for China, and any other large investor in US Treasury Bonds to be wary of continued investment going into the future.

The impact of this decision is already being felt today.  The Dow took it's largest drop since the crash in 2008, over 500 points.  The dollar will surely decline in value, as is already being speculated.  Inflation will undoubtedly rise and even though it's only a small amount, the cuts to government spending for this year mandated in the terrible debt ceiling increase bill that the Tea Party Republicans forced down our throats, and then had the audacity to bitch about and posture about not signing afterwards, will almost certainly all combine to create a "double-dip" recession.  For those in the middle class, who have just finally started to believe that perhaps the worst was behind us, there's another huge precipice coming up fast and the more we try to slam on the brakes, the harder the Tea Party is pushing down the accelerator.

But, that's all part of the plan, isn't it?

China got it.  They understood that our current financial mess is a result of bipartisan spending and it has been exacerbated by bipartisan blame-shifting.  They see that our government is a house divided and they're giving us a vote of no confidence by downgrading our rating.  They realize that all of the mess we're in right now is a result of a concerted effort by the Republican party to drive our country into a "double-dip" recession, to make sure the economy sucks when the 2012 election comes around so they can blame everything on Obama, trash the credibility of any Democrat to effectively run our country and guarantee themselves the white house for at least 4 years, if not longer.

According to House Speaker John Boehner, the Republicans got "98% of what [they] wanted" in this debt ceiling bill, and the Dow took it's largest drop since the crash in 2008 today, and has lost 10% in the last week.  So, that's 98% of what they wanted?  Would 100% have been to see the Dow drop 700pts?  To see the market lose 15% of it's value?

Our largest debt holder, China, is giving us a vote of no confidence, saying that we're no longer a good credit risk or investment vehicle.  They are threatening even further downgrades, which will only continue to tarnish our standing.  Even other large-scale investors in US Treasury Bonds are joining China in openly expressing doubt at the strength of the US going forward.  Interest rates will increase, the dollar will decline in value, and these two factors will directly impact the working class significantly.

Higher interest rates mean your credit card bills will go up, your loan payments will go up, if you have an adjustable home mortgage, you will probably be part of the second wave of foreclosures that are sure to hit as a result of sharply-increasing mortgage rates.  A declining dollar means inflation will rise, the price of everything you buy will go up, especially imported goods, and you will get even less for your money than you already are. 

The Tea Party Republicans were adamant that raising taxes was off the table in any debt ceiling discussion.  They refused to even look at any proposal that raised taxes on the "job creators" - the Republican code word for "rich people".  Well, what are increasing interest rates and a declining dollar but an effective "tax increase" for everyone?  And, when the middle class is already hurting more than anyone else in the current recession, a further economic burden laid on their shoulders is the equivalent of the Republicans spiking the ball on the heads of the working class.

Either the Tea Party Republicans really are too stupid to realize how terrible their economic policies are, or they are fully aware of it and doing all this on purpose just to punish the middle class and make us blame Obama for it.  Take your pick.  Either way, when they win, we lose.

Consumer spending is the largest part of our GDP.  I learned that in my first week of basic macroeconomics.  However, when you have a middle class that is shrinking, a record number of families applying for government assistance for the first time, and increasing number of people falling below the poverty level and an increased concentration of wealth to the richest 2% of the country, what kind of consumer spending do you expect to see?  Consumer spending is essential to stimulate economic recovery.  Consumer confidence directly translates into investor confidence.  The more money the average American has to spend, the more money they will spend, the better those businesses will do, the better the market will do, the better the economy does, the faster we get back to recovery.  People cannot spend what they do not have.

Instead, the lion's share of the wealth is still going to the richest 2%, and they see the instability in the markets and the uncertainty of our economic future and the last thing they want to do is start putting their money into the market and risking taking a big loss.  They're shoring up and preparing to weather the storm.  The "job creators" aren't creating jobs, because there's too much uncertainty in the market.  In fact, they're still laying people off left and right, to ensure profits stay up there and investors stay confident.  Sure, it's smart business for the company, but tell that to the guy who just got laid off, in the middle of the worst job market since the great depression, and has a family to provide for, a mortgage to pay and bills piling up.

Of course, I remember back in 2008, when a fortune 500 company CEO went on Neil Cavuto's show on Fox News and said "We will not create any new jobs or invest any real money into the economy as long as Obama is president."  They want him to fail, because they want the Democrats to fail, because the Democrats aren't on their side.  It's the same thing Mitch McConnell said when the Republicans took control of congress in the mid-term elections "Our number one priority over the next two years is to ensure that Barack Obama is a one-term president."

Michele Bachmann repeated that slogan at a campaign stop just the other day.  The Tea Party Republicans are obsessed with ensuring Obama's failure.  It's easy to say that it's simply a hatred for Obama, that's it's founded in racism and bigotry, but I think it's about tarnishing the entire Democratic party.  It's about making Obama look so much like Jimmy Carter that we completely forget that the best our economy has ever done in the last 20 years has been under Bill Clinton's two terms in office.  It's about discrediting the Democratic platform in it's entirety. 

The goal of the Tea Party Republicans is to tear this country down and rebuild it from the ground up according to their personal vision of what America should be.  From their distorted and historically inaccurate re-writing of the constitution and our founding father's original intent, to their corporatist economic policies that are completely written and handed to them by guys like the Koch brothers and other billionaire plutocrats.  The Tea Party is eager to vote against their own self-interests and are fighting to convince as many other angry, frustrated Americans as they can to do the same.  Wrecking the economy under Obama is just part of their grand strategy to undermine American confidence in the Democratic party and any Democratic president for at least another decade or so, which should give the puppet masters pulling the strings on the ignorant Tea Party politicians plenty of time to tear down the America that has taken nearly 250 years to build and install their new plutocratic banana republic.  Ask Latin America how that's working out for them, a government controlled by the ultra-rich and their paid-for politician puppets.  When the Tea Party wins, America loses.

"The [founding fathers] disagreed amongst themselves about most issues. But, the one thing they never argued about was that political power must stay in the hands of the smartest people and out of the hands of the dumbest loudmouths slowing down the checkout line at Home Depot. And yet Sarah Palin once said of Obama, 'We need a commander in chief, not a professor of law standing at a lectern!'.  I hate to break it to you, but: Thomas Jefferson, lawyer; Alexander Hamilton, Constitutional lawyer; James Madison, lawyer; John Adams, Constitutional lawyer. They were not the common man of their day" - Bill Maher