Thanks, austerity: Moody's downgrades UK's debts

Let's be very clear: this was not supposed to happen, according to conservatives and financial markets gurus. Great Britain embraced austerity -- it is still embracing austerity -- and yet Moody's has cut its credit rating to AA1.  So here is yet more evidence for those who still need it that national governments are not households, and the same rules do not necessarily apply.

Why?  Slashing public spending put the UK in a recession that -- get ready, Tea Partyers, this is the part that always gets you -- increased public debt. Here it is again, in case you missed it: slashing spending hurt the economy which increased debt:

“The main driver underpinning Moody’s decision to downgrade the UK’s government bond rating to Aa1 is the increasing clarity that, despite considerable structural economic strengths,” the Moody’s report reads, “the UK’s economic growth will remain sluggish over the next few years due to the anticipated slow growth of the global economy and the drag on the UK economy from the ongoing domestic public- and private-sector deleveraging process.”

The "ongoing deleveraging process" is business-speak for cutting one's debts. And there was an extra "f*** you" from Moody's after it cut the UK's bond rating:

“A combination of political will and medium-term fundamental underlying economic strengths will, in time, allow the government to implement its fiscal consolidation plan and reverse the U.K.’s debt trajectory.”

In other words, Moody's said, "We think you're doing all the right things, and we hope that someday it will work out for you, but in the meantime it's not, so we're downgrading you."  

That's called "damned if you do, damned if you don't," folks. But if you want to know what the "confidence fairy" really believes, look at what she does (downgrading), not what she says (cheering on austerity).

One final note: the credit ratings agencies do not rate debt levels, they rate the ability to pay one's debts. They're not the same thing. In the U.S., we have a record-high national debt, ($7 trillion of it thanks to Dubya), and yet government spending to pay the interest on that debt is at a record low, thanks to record-low interest rates. 

Moody's Downgrades UK Rating From AAA To AA1

By Jill Lawless

February 22, 2013 | AP

URL: http://hosted.ap.org/dynamic/stories/E/EU_BRITAIN_ECONOMY?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT

GOP's 'Blazing Saddles' bluff on debt ceiling (AGAIN!)

By mocking CNN's Ali Velshi on the debt ceiling, Rush Limbaugh proved Velshi's point that Republicans don't understand the difference between the debt ceiling and the debt (which comes from spending authorized by Congress).

No, Rush and the rest of you, the debt ceiling is not like the spending limit on your credit card. Bad analogy. It might be a fitting analogy if you were allowed, in some crazy alternate universe, to set your own credit limit on yourself...and then decided to exceed that limit every 6-12 months without paying down your balance, and then "threatened" to default on your own debt and ruin your credit history as an inducement to yourself to stop spending so much, without really intending to cut any expenses except groceries for your kids and prescription drugs for your elderly mother, but not your gun club membership or ammo purchases. 

I know, I know... that doesn't make much sense, it's still a pretty bad analogy, but that's as close as I can come to describing, in household-finance terms, (since that's all Republicans will understand), what the Republican Congress keeps doing to itself -- and to us, by extension.

As Walter Dellinger, the former solicitor general under Bill Clinton, remarked, the House Republicans' stance on the debt ceiling is like that scene in Blazing Saddles when Sheriff Bart (played by Cleavon Little) takes himself hostage by pointing his own pistol at his head, where the townspeople are Wall Street, cable news and most of the media:

Bart: [low voice]  Hold it! Next man makes a move, the ni**er gets it! 

Olson Johnson:  Hold it, men. He's not bluffing. 

Dr. Sam Johnson:  Listen to him, men. He's just crazy enough to do it! 

Bart: [low voice]  Drop it! Or I swear I'll blow this ni**er's head all over this town! 

Bart: [high-pitched voice]  Oh, lo'dy, lo'd, he's desp'it! Do what he sayyyy, do what he sayyyy! 

[Townspeople drop their guns.  Bart jams the gun into his neck and drags himself through the crowd towards the station] 

Harriet Johnson:  Isn't anybody going to help that poor man? 

Dr. Sam Johnson:  Hush, Harriet! That's a sure way to get him killed! 

Bart: [high-pitched voice]  Oooh! He'p me, he'p me! Somebody he'p me! He'p me! He'p me! He'p me! 

Bart: [low voice]  Shut up! 

[Bart places his hand over his own mouth, then drags himself through the door into his office] 

Bart:  Ooh, baby, you are so talented! 

[looks into the camera] 

Bart:  And they are so *dumb*! 

Yep, Republicans sure must think we're dumb to keep pulling a Sheriff Bart on us again and again....