S&P is right about political risk, not necessarily the debt

S&P downgraded US debt the other day because of the deficit ceiling fiasco.  And they're right.  

As Ezra Klein notes:

But that doesn’t make Standard Poor’s wrong in this particular case. “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,” they explained in the statement accompanying Friday’s decision. After Republicans in Congress spent three months weighing whether or not to default on our debt and Senate Minority Leader Mitch McConnell said that paying our bills would never again be a foregone conclusion, can anyone really argue with that? After every Republican presidential candidate save Jon Huntsman either remained silent on, or flatly opposed, the deal to raise the debt ceiling, can anyone really say that U.S. debt is completely riskless? That there’s no chance of a political miscalculation, and if there is such a chance, that they can perfectly predict the outcome of the ensuing chaos?

The repugicans, including repugican presidential candidates, made clear that they no longer feeling obliged to pay US debt. S&P reacted accordingly.

Now, S&P is hardly harmless here. They decided to involve themselves in the US political process, not just observe it, not just react to it. They decided they wanted - THEY wanted - a specific debt deal, to the tune of $4 trillion, and they wanted it NOW (like Violet in Willie Wonka). To hell with the economy, to hell with whether it threw the US and the world into another serious recession. In that way, S&P endorsed the repugican economic position, and that's wrong.

But they're right about their assessment of US politics. The repugicans have gone completely insane. They've always been a bit obstinate, see Gingrich circa 1995-96. And they've only gotten worse. It's the repugicans that orchestrated this crisis (with S&P's help) and it's the repugicans that get the blame. It didn't help that the President enabled it, through his previous poor negotiations and his current willingness to one up the repugicans in their budget cutting madness. But at its core, it's still the repugicans that were behind this entire "let's stop paying the debt" fiasco.