During his Monday press conference, President Obama blamed Republicans for the first ever credit downgrade of the United States back in 2011, but this is contradicted by what ratings agency Standard and Poor’s actually wrote when it issued the downgrade.
Discussing the dangers of Republicans insisting on spending cuts as a precondition for raising the debt limit, Obama said: “The last time Republicans in Congress even flirted with this idea, our AAA credit rating was downgraded for the first time in our history.”
The reality is that there were several reasons that S&P downgraded the nation’s debt. It’s true that in its August 5, 2011 statement announcing the news, S&P did express concerns about “brinkmanship” and using the debt ceiling as a “political bargaining chip.” It did, also, criticize the unwillingness of Republicans to agree to higher taxes. Yet the agency also blasted the debt limit deal for not going far enough, especially when it came to fundamental reforms to entitlements, which were resisted by Obama.
Here was S&P at the time:
We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the
general government debt burden by the middle of the decade.
Republicans and Democrats have only been able to agree to relatively modest savings on discretionary spending while delegating to the Select Committee decisions on more comprehensive measures. It appears that for now, new revenues have dropped down on the menu of policy options. In addition, the plan envisions only minor policy changes on Medicare and little change in other entitlements, the containment of which we and most other independent observers regard as key to long-term fiscal sustainability.
Our opinion is that elected officials remain wary of tackling the structural issues required to effectively address the rising U.S. public debt burden in a manner consistent with a ‘AAA’ rating and with ‘AAA’ rated sovereign peers…
Blaming GOP debt ceiling brinkmanship alone for the S&P downgrade is to ignore the damage done by Obama’s unwillingness to make meaningful reforms to our nation’s broken entitlement system.