As you know, I have become a big fan of Paul Krugman as of late. Recently he has been hating on the rating agencies, and I wasn't sure why. Then I read this really good post at Economix about the possible debt ceiling scenarios (which really depressed me). It seems that if the government imposes savings over the medium and short term, the rating agencies might downgrade the US anyway if the cuts aren't "credible". I don't know what that means exactly, but it isn't comforting.
What I don't get is that when most economists are saying we don't have a short term debt problem, why are the rating agencies concerned? Is Krugman right that they are ideological? Either way, it looks like Catherine Rampell is right, this is unlikely to end well. I foresee scenario 4 (if we are lucky - scenario 1 isn't out of the question) - where the cuts are in the near term, rating agencies are appeased, and our economy goes down the toilet. Thanks rating agencies!
I just want to cry. I see no way out of our stagnant economy and high unemployment and no one is even fighting for it. And anytime you talk about the people who need government support - unemployed - and how Republican policies will only hurt those people, you are accused of class warfare (which is of course an attempt to end debate because they don't actually have a response to that criticism). There is no real debate and probably will be no solution.
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