The tax can't happen unless it's a trdae off for something else. The math error tossed out is like like publishing a 10 chapter book while short on 3 of the chapters.

Was David Beers hoping to rain on what is left of Obama's recovery?

It was Beers operation that we saw drug through the mud and new regulations after that subprime thingy.

I don't really have much of a problem with your assessment, except the notion that polls should be taken into consideration for these decisions seems absurd, especially in an age where you can push a poll to find whatever you want to find.

Speaking of which, your link that you claim shows 'GOP members of Congress are ridiculously unpopular', doesn't say anything of the kind: It links to a blog called The Monkey Cage that uses the same Gallup Poll that Congress is unpopluar (as if that's new....) to predict that this must be trouble for Republicans,which may or may not be true, but doesn't mean that 'GOP members of Congress are ridiculously unpopular', so you might want to check that your links actually say what you thnik they say.

I mean, it's a cute meme: That the tea partiers are crazy and that they're the ones responsbile for us running $1.4T deficits, as if we could just tax our way back to prosperity. But trust me, outside of academia and our brahmin circiles, people just aren't buying it.

If Obama is a lame duck, yes, he'll veto an extension. But if he's a lame duck, wouldn't that likely mean a Republican Congress and a Republican President which would pass the extension on January 21st? Remember the Dems would be demoralized, so they're not likely to make a stiff resistance.

I hope that's not something we have to face, but remember Murphy's Law.

{Some Tea Party members were willing to risk a crisis, but not actually go and perpetuate one. }

Dan,

With respect... the actual "crisis" is that Tea Party Republican officials aren't powerful enough to take leadership control of the GOP House caucus and Senate caucus.

The actual "crisis" is that once again the can has been kicked down the road.

The actual "crisis" is that under "best case scenario" if this "deal" is to work "as planned" the federal government is set to add anywhere from $7.1 trillion to $13-plus trillion to the existing National Debt over the next 10 years.

I'm sorry, Dan, but to infer that forcing an "addict" into "detox" is the problem rather than the solution strikes me as... er... mind-altered reasoning.

William R. Barker
Harriman, NY

The only thing I think you are missing is that the US debt has not been downgraded to B or C, but just to AA+, meaning that (from the S&P perspective) it has gone from "essentially certain to pay off it's debts", to "really really really likely to pay off it's debts".

Reasonable people can disagree about who is most responsible for the recent fiasco, but I think the crisis definitely shows that once unthinkable things - i.e. default - are at least now on the table in Congress. That warrants the slight downgrade in my opinion.

While I like the train of thought here, Drezner stops on a siding well short of the station.

How did the Bush tax cut get extended last time? Because Obama had something he wanted more than the Republicans - an extension to unemployment.

How might the Bush tax cut get extended next time? Because the debt limit still exists and will again need raising - or several other possibilities among things Democrats care about enough to compromise.

... I think S&P's political analysis was fair. True, they should have political scientists and analysts on board if they believe political risk is a component of credit risk, or that politics can have influence over the government's ability to fulfill their debt obligations. I agree with you that they clearly did not do enough analysis on this front.

This makes their argument less valid, but not entirely incorrect. Firstly, the debt ceiling has, if you believe the words of McConnell and Ryan and others, become political (If you believe the words of Pelosi, it has not... what a breath of fresh air after these long and trying months). Secondly, the last set of elections had people running on issues of fiscal responsibility, and winning, so this is not a new phenomena with which voters had no say on. Finally, the US is one of only two developed countries to have a debt ceiling (Norway being the other), and it's certainly the only one to have approached it so many times.

You are missing the fact that S&P's rating system as applied to sovereign countries is unjustifiably precise. There is no evidence that fine distinctions along the rating metric are valid and reliable for countries. A country rated AAA is less likely to default on debt than a country at AA? I don't think so. Very high and very low ratings do, however, appear to differentiate risk. Thus, the downgrade from AAA to AA+ is misleading, deserves to be inconsequential, and should not have happened. A "negative outlook" is warranted insofar as trends are not good and could lead to a SIGNIFICANT downgrade--but even S&P would admit that we're not there now.

Reading the debate here I can't help but think about how correct Bent Flyvbjerg's ideas of Phronetic Social Science are. I think Flyvbjerg ideas about social sciences needing to stop being predictive but rather returning to understanding the deeper questions of the present (i.e. What is really going on? Is this development desirable? Who gains and who loses, and by which mechanisms of power? What, if anything, should we do about it?) are pretty applicable to the conversation around credit rating agencies. Jules Kroll, who is the father of corporate investigation, has attacked the agencies for hiring to many financial economists who have created quantitative models that have no relationship to reality and take the data they receive at prima faci value.

I think this problem arises from the fact that we as social scientists or political historians have really failed to respond to the challenges that a financialized economy has presented. Instead of actively challenging the "quants" who staff wall street by asking the critical questions of how exactly this operates in the real world. Instead, the various disciplines have either tried to replicate quantitative models (political science) or become miniature English Depts. interested in culture with no application to either the private or public sector (history, anthropology).

I think our challenge (and I say this as a PhD student in political and economic history) is to redirect our epistemological concerns to contextualizing and understanding as it is and insert nuance into the kinds of models that operate the major financial systems. This would need a cultural shift at the levels of financial elites and within the academic departments.

Mr Drezner overlooks an important detail when he takes sides against the the Tea Party. He accuses them of intransigence in the debt ceiling negotiations when they refused to agree to any tax increases. He neglects to mention that Mr. Obama and the other Democrats vastly increased spending, that they refused to engage in any meaningful reductions in spending, and that they too were intransigent in their position. The Tea Party position was basically this - "don't talk to me about raising taxes until you stop this crazy spending!" This is perfectly rational in my view.
Since coming into office the Democratic administration with a Democragtic congress VASTLY increased prior spending levels, which, from the previous administration, were already at a justly criticized excessive levels, passed legislation that obligates the nation to even higher spending levels in the future, and has imposed crippling regulation on the business community, among other things. In such a frightening scenario, someone has to be the grownup. Someone has to say, stop!
In such a situation, agreeing to tax increases of any kind is tantamount to POSTPONING indefinitely any meaningful spending cuts. It is like letting the addict continue with his addiction and not go into therapy.
A responsible position is to say, "we'll talk about tax increases AFTER you've gone to therapy and implemented meaningful reductions in spending, reduction that are implemented now and not in some distant never-coming out-year on the budget."
In short, what Mr Drezner fails to observe is that the allegedly intransigent Tea Party representatives are in the unpopular but necessary role of carrying out an emergency intervention to stop a dangerous drug addiction. In this case the drug is not heroine. It is something far worse - it is the unrestrained spending which is leading an entire nation, and millions of people, with world-wide repercussions, into bankruptcy.
When an intervention is underway, the last thing you want is to be accommodating to the addiction. The reason is simple. The addict simply doesn't listen to any advice because his addiction actually alters his brain chemistry and puts him into denial. Hence, the one doing the intervention, must communicate very forcefully and clearly in order to overcome the barriers inherent in the addiction.
Please consider these thoughts carefully. Despite what some may think, they are not offered from a partisan point of view. We all love this country and want to see it survive and do well.

...and Obama is going to grow a spine? Whatever you've been smoking I want some of that.

Does it seem contradictory to anybody else that the Dems are demonizing Tea party members of congress for not being willing to increase revenue/raise taxes, but at the same time admit that the president has failed in the area of job creation. Unemployment is over 9% (more like 15 percent in my area). How does it make sense to raise taxes in an economy like this. If the president were serious about generating revenues through taxation, you would think he would be much more serious about encouraging and empowering the people who actually create jobs, and get more people paying taxes. The people who "can afford" to pay more won't see it that way, at least not for long, and they'll take their ball and go play on another court.

This seems a fair description of Mr Drezner's " they need to do some actual forecasting. Instead, they looked at recent weeks and extrapolated into the future." The second half of this nonsense is a definition of forecasting, rather than -- as Mr Drezner seems to think -- an alternative, or opposite. He's written that S&P should be actually forecasting, instead of actually forecasting.

At this point, he was defending Mr Drum's argument that S&P had no right to speak up until the bond market started to collapse. I see only one sort of sense in that argument, which is that provided the bond market remains okay, everybody should just shut up about other matters of grave concern. Mr Drum's got his bonds, and that's all that matters.

Pity the American people, now thinking the money markets are driven by a small share of the nation panting for obscene personal wealth and often getting it; that Congress is a pack of bribed and squabbling ideologues who share much less of a view of the country than might be better for the country; and that there is a president assailed now on all sides as unwilling or unable to assume real leadership. The high crackpot factor among potential rivals for the presidency in November 2012 suggests little future improvement.

In terms of recent history, which Mr Drezner seems to despise, it's worth keeping in mind that Congress writhed mightily in the last month supposedly to reduce the national debt, and allowed its increase. In lieu of what it seems to have wanted, it got what some of the extremists really wanted: first-stage amputations of parts of the national government. Then, a few days later, another part, chomped out of the FAA. Opportunities for more of this abound. How many straws in the wind will indicate that S&P's opinion was pretty darn smart? I think that number has already been reached.

The Gallup poll doesn't say that GOP members of Congress are unpopular. It says that Republican *voters* hate Congress as much as Independents do, whereas Democratic *voters* give Congress a higher approval rating.

That could mean that conservatives will stay home or vote third party, but not necessarily. It could mean that conservatives are highly motivated to "finish the job" and take the Senate.

those entitlement payments would stop because of Congress, Public Pressure in the end would have pressured Congress to adhere to Obama. He was required to sázky be this much bold without worrying about his re-election.He failed miserably there and then S&P concluded that there is no realistic chance that revenue increase would happen in future.I do not think anything is wrong here on S&P side. Dan is simplistically falling into the trap of Chait to think that 'Congressional no-action' will solve the problem. Republicans are simply too good in their Politics to let it happen. After Obama having handed them so lucrative victories, it will be stupid of GOP not to go for full victory.

Now thinking the money markets are driven by a small share of the nation panting for obscene personal wealth and often getting it; that Congress is a pack of bribed and squabbling ideologues who share much less of a view of the country free bets than might be better for the country; and that there is a president assailed now on all sides as unwilling or unable to assume real leadership. The high crackpot factor among potential rivals for the presidency in November 2012 suggests little future improvement.

When will Americans ever learn?

If a global market analysis revealed that any other nation had such a dysfunctional government, was in a similar economic position, and retained a AAA rating, all the US-based commentators would be screaming foul and spitting blood over how the ratings agencies were being unfair and that retaining such ratings was penalizing the US and taking jobs out of the country.

But when it comes to the US the story is quite the reverse.

And when it is quite clear to those of us in the rest of the world that the US economy is only prevented from collapsing due to the support of the rest of the world (that actually first and foremost wants to avoid a collapse of the dollar, not of the US economy - the latter only matters inasmuch as it means that the global market for products shrinks) it is quite laughable that Americans can carry on with this little charade and pretend that nothing is going wrong.

Are you mad? Can't you see beyond your borders? Don't you realize that there is a big world out there? Just because most of you don't have passports (hence the subject of this rant) it doesn't mean that the world starts and ends at your borders. You can't just say that you can obtain a free top credit score just because you are America. This isn't a military situation where you can get what you want because you are the only nation with the big guns. This is a situation where the world credit markets have bigger guns than you, and their guns are getting bigger whilst your guns are getting smaller and your armor and shields are getting thinner.

Wake up America. The day of reckoning is coming. You've lived beyond your means for too long. You need to cut consumption and increase savings before the rest of the world forces you to do so. Remember the suffering that the IMF/WB cause to the general population when an ESAP is forced upon a nation? Do you want that? No, I'm sure you don't. So a free tip - get your head out of the sand and fix things before the IMF/WB fixes you.

Basically for revenue to come up, Dems need to put up 'some fight' and what recent incidents have shown is Dems and Obama do not want that, can not do it and are simply losers. That is a political call S&P has made and what more political analysis for that is needed to justify? Is it not a homeimprovement plain and simple factual observation of last few months?