Downgrades, finger pointing and irrational voters

by Norm Leahy

There has been and will be a great deal of finger pointing in the wake of the S&P downgrade of the federal government’s debt. But there’s an old saying, or maybe it was just a Dire Straits lyric — when you point your finger ’cause your plan fell through, you got three more fingers pointin’ back at you. That applies quite nicely to the debt debate.

Republicans who scream that it’s all the Democrats fault for spending like mad hatters ignore or explain-away the spending excesses of the Bush years. Democrats who wail and gnash their teeth at Republicans who refused to raise taxes forget that under their watch, federal deficits and debt have piled up far faster than they did during the entire Bush tenure.

This back-and-forth, as cathartic as it is for some, solves nothing. The debt deal that managed to pass congress was their best effort — and the markets and ratings agencies have said it wasn’t good enough. But it was all that could have been expected given the political divide in government, some will charge. Perhaps. But what is the source of that divide?

You and me. Or at least the you and me who vote. We put people in power who do what we want them to do, whether it’s fight like crazed bobcats against taxes or mount furious charges to expand the size of government. There are precious few Edmund Burkes in Washington, voting their consciences and beliefs over the needs and wants of their constituents. What we are left with, then, are reflections of ourselves. And its not a pretty sight.

Back in 2007, I wrote a piece for the old Bacon’s Rebellion e-zine about irrational voters, a concept George Mason University Prof. Bryan Caplan advanced in his book of the same name. He discussed how our inherent biases lead us to believe things that simply aren’t true. and when we take those biases into the voting booth, “…socially injurious policies win by popular demand.”

Sift through the stinking mass that is the federal debt, and you’ll find receipts for all sorts of ill-considered ideas, policies and programs. And each of them was put there because we, through our representatives, demanded it.

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8 responses to “Downgrades, finger pointing and irrational voters”

  1. Aren’t these the same rating agencies that gave triple A ratings to the securitized mortgages?

    What are STILL considered to be one of the safest, most secure investments in the world? That’s right.. US Treasury Notes.

    What happens if those notes drop?

    Will pension funds dump them? Will the Chinese come get their money?

    maybe…. let’s say the pension funds dump them… you know … AAA-only “investments”.

    what would replace them? Republican Supply side theories

  2. Groveton Avatar

    Let’s say that the United States were a company rather than a country. America, Inc has been raising its debt load (as a percentage of revenue) for years. Now, America, Inc is reaching the level where several other companies have failed (debt = 100% of revenue / GDP). America, Inc’s CEO and board of directors recently met and agree to increase the level of debt.

    A rating agency lowed America Inc’s rating from best in class to second best.

    What on Earth else would anybody have expected?

  3. Larry, from what I’ve seen and read, the issues that would be dropped are junk bonds (in an effort to smooth the overall risk portfolio).

    Out of curiosity, I wondered what the federal government’s FICO score might be and whether Uncle Sam could walk into a bank and get a car loan. Someone did that a while back, and the results, which are here, estimated that our favorite Uncle would earn a 620…right on the border between fair and poor credit.

    But this was calculated a while back, so the numbers have likely changed.

  4. America’s problem is that there is a huge disconnection between those who want and those who have to pay. I am not arguing against some level of progressiveness in taxation, but we have tens and tens of millions who don’t pay federal income tax, but are looking for programs and services. We also have the people who represent the tens of millions and want their votes who are more than happy to spend other people’s money. Then let’s top this off with the hoards of so-called business operators who live off the federal trough. I am not against government contracting; we need it. But we also cannot afford to spend money to keep contractors in business. We must control spending. We must control the spenders. We must control what we spend money on.

  5. Andrea Epps Avatar
    Andrea Epps

    When asked if US Treasuries were still a secure investment, Greenspan just said Yep. He said we’ll never default because we can always print more money.
    I am even watching it again.
    He also said he is worried about the market tomorrow. Isreal’s market tanked this morning he said, but he mentioned the other issues in the region.
    The larger issue is finding someone who has the ability to prevent a double dip…but then again, that will be up to Europe…right?

  6. propercharlie Avatar

    Couldn’t bias mean culture? Culture is what’s left over after you forgot what you tried to learn. Human beings are irrational because culture is irrational. Regardless of its nature or nurture origin culture drives behavior. We are living in a period of two competing cultures: Modernism, which is a therapuetic culture and the tattered remains of Judeo-Christianity, which is an honor/shame culture. The two are at war. Sometimes within the same person.

  7. Crazed bobcat is a very real image for me. I still have the scars.

    We have plenty of work to do: the economy is in no danger.

    Most people with a mortgage have a higher debt to income ratio than the govt.

  8. so.. I still ask the question.. if you want your money in a secure place.. would you NOW put it in US Treasuries?
    The answer seems to be yes…

    it’s STILL the defacto world standard for a “safe” investment, right?

    The stock market sold off CORPORATE stocks and bonds – not U.S. Treasuries, right?

    and then of course we have the very troubling prospect that the US will never not pay off it’s treasury notes because it can always print more any time it needs to – right?

    so.. let me guess… this is all Obama’s fault, right?

    the Republicans will fix this once we get Obama out…right?

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