In a recent interview, Rick Santelli made the assertion that it was because of the Tea Party the USA wasn’t downgraded to BBB status by the same geniuses at Standard and Poors who saw Lehman Brothers and Bear Stearns as solvent companies worthy of high ratings. In the middle of another vanity rant in front of CNBC’s cameras (this time filled with meaningless sports metaphors) Mr. Santelli tells us “Don’t get caught up in the minutia. All this BS.” Well one man’s minutia is another man’s important detail. When confronted with the Conventional Wisdom world of pundits that is run by vain rants in front of cameras using focus group tested sound bites, the details have never been more important.
But this time, there is a reason that the vain elitist pundit does not want us looking at the details. According to Standard and Poors’ Research Update- they lay the blame at the Republican Congress specifically the Gang of Twelve. They site failure of Republicans in Congress to raise revenues as a cause for concern that the Bonds may not be paid. In Standard Orwellian Doublethink he turned the situation on its head with an exact reversal of the facts and claimed the Tea Party was to be thanked for avoiding a BBB rating. And typical of a concise TV pundit presentation, no evidence is ever presented to back that up (although I’m sure mises.org is busy cherry picking those facts right now).
As I mentioned in my Where are we on the Deficit Football Field piece-we are nowhere near default. You can go to the CIA World Factbook and look at what our external debt is is in relation to our GDP. You can compare this with other countries. There are countries with higher ratios of external debt to GDP and they have no run on their bonds. This was an entirely contrived crisis (the goal of which is not fiscal solvency but killing socially beneficial programs) which Standard and Poors reacted to by correctly saying whom was at fault.
And if we were to go in the other direction, we could immediately do something direct about unemployment (Government workers and contractors do spend money and there is a multiplier effect). We could put people back to work repairing our infrastructure. We could eliminate many states deficits and have adequate fire, police and schools. Rick Santelli would throw a fit. But look at his behavior in February 2009 when a meager stimulus was being pushed through Congress to deal with the worst financial crisis in recent history. Mr. Santelli and others like him are going to throw fits no matter what is done (especially when cameras are present). As we recently saw in the “debt crisis” debate, there is no appeasing him or those like him, so it should not even be attempted.
At the time where Mr Santelli did his famous “Well, Mr. Obama…” schtick in front of the CNBC cameras, the think tanks that spread a message similar to his were busy rebranding the policies that had brought us to this point, and part of that playbook was saying “Failed” Stimulus instead of Stimulus especially when there were cameras shooting video. It was February 2009.
There are problems with taking the Dow as an indicator of economic health, but as a general yardstick, I’ll use it now merely because it is so widely used. In Feb 2009, the Dow was at 7,600 approximately. The Stimulus failed so much that the Dow turned around and headed up to 12,500 in the space of two years. Unfortunately, it was not enough to deal with unemployment. Unemployment and underemployment are the true bites, the true measure of human misery. of any recession. To Mr. Santelli it is merely a number on a page and a higher ration of impoverished souls he must look at on his limo ride to and from the Chicago Board of Trade. He has a very important job of investing people’s money until it is all gone, so I’m sure that added stress on his limo ride is very harsh on him!
But let’s put a move like that in historical perspective, The Dow was at 7,600 in November 1997 and passed 12,600 in February 2007. That’s some failure! Ten years (with wartime and deregulation caused housing bubble stimulus) worth of stock improvement in just 2 years is impressive. If it had been big enough to put people back to work, the Democrats would never have had to give away my Medicare benefits to Washington elitists in order pay for the Afghan and Iraq occupations.
So now, The Dow has dropped down to where it was last December. That’s all the value and economic progress of this entire year evaporated because no one stood up to the “Gang of Twelve” freshman Republicans. And as a quick History lesson, didn’t they welcome Obama into office with a cry of “I hope you fail!”? Regardless of the Unemployment, Underemployment and misery of their fellow citizens, they want Obama to face reelection with a poor economy even if they have to be the ones who kill the recovery personally.