Tag: S&P

Cokie’s Law vs. Social Security

Dean Baker at Beat the Press:

… it was incredibly irresponsible for NPR to tell listeners in its top of the hour news segment that the market plunged because Standard and Poor’s downgrade of U.S. debt. NPR does not know this to be true and it certainly is not obviously the case.

The market that should have been most immediately affected by the S&P downgrade was the U.S. bond market. However bond prices soared in the trading immediately following the downgrade and continued to rise through Wednesday. If there was greater fear that the U.S. would default because of the downgrade, then bond prices should have plunged as investors demanded a higher risk premium. This did not happen.

The most obvious alternative explanation for the plunge in the market is the risk that the euro could break up as the debt crisis spread from relatively countries like Greece and Ireland, to the euro zone giants, Spain and Italy. The prospect of a euro zone break-up raises a real risk of a Lehman-type freeze up of the world financial system. It is far more plausible that this prospect led to the plunge in the stock market than the downgrade by one of three major credit rating agencies.

This point is important because many political actors, including National Public Radio, are trying to use the debt downgrade as an argument for cutting Social Security and Medicare. Their argument will be furthered if they can claim that the downgrade had enormous consequences for the stock market, since so many people involved in political debates (i.e. columnists, policy wonks, reporters, congressional staffers) have substantial amounts of money invested in the stock market.

This is exactly right. All this nonsense about S&P’s downgrade “causing” movement in the US stock market (which, as far as the MSM is concerned, is entirely comprised of the Dow Jones index) is wrong. Foolish, even. This has been reported occasionally, and NPR and other political actors are at least slightly tempering the “S&P caused it!” meme.

But it won’t matter. The facts do not matter. Cokie’s Law, the ironclad rule that anything, any information be it merely incorrect or proven to be an outright lie or pure fabrication, once “out there” must be reported as though it is fact. Period. Therefore, as weeks and months pass, the core narrative becomes:

“S&P downgrade caused massive loss of wealth in DJI; therefore Social Security and Medicare must be cut; elimination is the GOP’s preferred outcome, therefore the "sensible center” is merely devastating cuts followed on every few years with more “sensible” cuts until we reach said elimination. This is the only Serious Position possible on the issue when one considers the facts of the S&P downgrade and its devastating impact on the Dow. Why, some say that as much as $1T in wealth evaporated. We simply must act to cut Social Security. Everyone knows it is the problem here.“

There will be nothing else. No other opinion will be allowed, and if directly challenged by the reality of the situation, reporters and pundits will characterize the truth as simply one other fringe "opinion” that the dirty fucking hippies are pushing again, and no better or worse than the obvious fallacy that was created by them simply because said fallacy has been widely reported. When (and if) directly challenged on the ontogeny of said MSM-created fallacy, they will elect to “leave it there,” declare it “complicated,” or, in the case of Cokie herself, sputter about it being “out there.” You heard it here first.

S&GOP

Ezra Klein:

My hunch is that S&P was making a political argument and felt the need to cast it as deficit arithmetic. Then, when their arithmetic proved wrong, they were left looking foolish. As it stands, you actually can’t coherently merge the first and second versions of S&P’s explanation of the downgrade. That should tell you something about how rigorous their framework is, even if doesn’t obviate the still-legitimate points they made about our political system.

I think Ezra is fundamentally right here. The problem is this: if S&P set out to make a political point, they did so in such a fumbling manner that the political message, the most important part, was utterly lost. The MSM has a fundamental inability to report on something negative relative to a single party. Obama offered at least four debt ceiling deals, including several that had previously been GOP deals. How was this reported? “Both parties unwilling to compromise; President unwilling to lead and/or deal”
S&P issues a report castigating GOP intransigence on revenues. Reported: “political system unable to deal with current crisis.”

If S&P truly intended to make a political point, the report itself needed to be called “The GOP’s Willful Destruction of The American Century” or “Political Nihilism and Today’s GOP: A Downgrade Story” and furthermore needed to be told through colorful pictures and in fewer than 50 words. There’s no way in hell a company like S&P is going to do this; they are fundamentally incapable of really making the political point that they seem to have set out to make, as such moves soon prove to be bad for business. (And don’t think for a moment the GOP will forget this slight. There will be GOP initiated investigations, damaging ones, into S&P at the first available opportunity). Therefore: you don’t do it at all unless you can back it up with hard numbers such that the conclusions are inescapable. Which they also couldn’t do. But that national embarrassment is a whole other post.
Assuming for the moment that they went there and made the political point utterly and inescapably explicit, even then, it would be hard to get the MSM to report it as such. They’d dodge with a “it’s all very complicated” or “let’s leave it there” or simply book only conservative guests and allow them to talk as long as they want to without challenge or correction. Above all else, they’d avoid any mention of what was actually written in the report. You know: pretty much what’s happened in the last several days.

Naturally, this all has to transpire alongside the slow-motion European financial collapse and its effect on global markets. Typically “USA über alles” reporting over-stresses the influence, if any, of the downgrade on global events. “Post hoc, ergo procter hoc motherfucker” may as well go on the Times masthead. People are stampeding for Treasuries!!! It must be the downgrade of that instrument’s backing that is causing them to do this!!! (Had the downgrade not occurred, at least FOXnews and maybe the broader media would have blamed the collapse in value on the Presidential birthday BBQ’s failure to durably impact jobs creation). The MSM response? Get some folks on to scream “I blame the Democrat and the dirty fucking hippies for this historic downgrade of the United States and the similarly timed collapse of the global markets. The only response is to slash the social safety net, cut taxes, and increase defense spending. Or a mandatory National Week of Constant Prayer. Whichever.” What other rational approach is even possible?“

This is why we fail.

Who’s To Blame?

Jay Bookman wants to know a few things:

Who rejected “the comprehensive fiscal consolidation program,” with cuts to entitlements accompanied by higher revenues, producing a debt reduction of $4 trillion, proposed by President Obama? That would have produced twice the debt reduction promised in the deal that was finally accepted.

Who rejected the very notion of compromise, making “the differences between political parties … extraordinarily difficult to bridge,” with one side announcing that only total capitulation by the other side would be accepted?

Who embraced the policy of political brinksmanship that pushed the country so perilously close to default? Who publicly embraced the threat of default as “a hostage that’s worth ransoming,” announcing that the tactic would be used every time the debt-ceiling issue arises from now on?

To hear any of these questions, much less any of their answers, one would be well advised not to even bother with the MSM. They are in full on “pox on both houses” mode. This is an entirely self-inflicted, politically motivated wound. Why won’t anyone ask the GOP why they thought it best to bring ‘em on?

Who’s To Blame?

Is S&P Running Interference for the Right?

jasencomstock:

[…] Besides, Democrats could easily interpret (and should, vindictively) the warning from S&P as a call for higher taxation.

Precisely. S&P is commenting on the inability of said gubmint to actually do anything and most definitely not on the underlying capability of the United States economy to produce growth and/or sustain a marginally higher tax rate necessary to retire enough of the debt to keep the entirely mythical bond vigilantes at bay.

But, yeah, why does anyone alive care what S&P or Moody’s et al. says? Serious question. They may as well manufacture high quality buggy whips for all their relevance post-meltdown; there is no greater indictment of the lack of serious change to our financial system than this.

Is S&P Running Interference for the Right?