Standard & Poors takes Moody’s threat to downgrade U.S. debt of there’s no deal and goes a step further, saying, in effect, that while it believes the political class will come to some sort of deal, not all deals are created equal:
Congress and the Administration might also settle for a smaller increase in the debt ceiling, or they might agree on a plan that, while avoiding a near-term default, might not, in our view, materially improve our base case expectation for the future path of the net general government debt-to-GDP ratio. U.S. political debate is currently more focused on the need for medium-term fiscal consolidation than it has been for a decade. Based on this, we believe that an inability to reach an agreement now could indicate that an agreement will not be reached for several more years. We view an inability to timely agree and credibly implement medium-term fiscal consolidation policy as inconsistent with a ‘AAA’ sovereign rating, given the expected government debt trajectory noted above.
That would seem to indicate that if all parties concerned adopt Mitch McConnell’s “Plan B,” which would shut responsibility for debt ceiling increases to the President and avoid any serious changes to either spending or the tax code, S&P will likely downgrade U.S. debt within 90 days.
But one thing that has gotten lost in all the hand-waving, petulance and posturing over the debt ceiling is that none of the plans past, present or future would really cause spending to go down. As the Richmond Time-Dispatch reminds us this morning, even that draconian, world-ending plan from Rep. Paul Ryan would see federal spending continue to increase, though at a slower rate than that proposed by the President:
You might not have heard this from the president’s cheerleaders in the establishment media, but nobody in power has proposed to shrink the federal budget. Nobody. The current federal budget totals about $3.8 trillion. The Republican proposal, from Rep. Paul Ryan, would raise spending to $4.7 trillion over the next decade. Obama wants to raise it to $5.7 trillion. The fight is not over whether to raise spending — but by how much.
Mind you, those increases would come on top of the already staggering recent growth of the federal budget — which stood at $2.9 trillion just three years ago. Spending has ballooned 30 percent, and Republicans agree to grow it more.
In short, no one in Congress or the White House is talking about using honest math.
(Cross-posted at Score Radio Network)