Rating falls, markets plunge, critics rage. But tea party isn't blinking.
| Washington
It was tea party intransigence in debt ceiling talks that led to the first-ever downgrade of the US credit rating, critics say.
But as world financial markets reacted convulsively to the downgrade on Monday, tea party leaders were not blinking.
鈥淏laming the tea party for America鈥檚 debt crisis and downgrade is like blaming the fireman for fires,鈥� said Sen. Rand Paul (R) of Kentucky, whose surprise primary victory in May 2010 put the tea party insurgency on the map.
From Standard & Poor鈥檚 stunning downgrade on Friday to a 634-point plunge in US stock markets on Monday, tea party lawmakers saw it all as confirmation that they had been right all along.
The tea party response to the events comes down to two themes: First, the way out of unsustainable debt is deep cuts in spending, no tax hikes, enforceable spending caps, and a balanced budget amendment to the Constitution, period.
And second 鈥� in response to S&P鈥檚 concern that Washington doesn鈥檛 have the political capacity to solve its debt problem 鈥� if there is any dysfunction in Washington, it鈥檚 the refusal of the White House to adopt the tea party formula.
鈥淲hile Democrats would like to lay the blame on the tea party for the current economic failure, it is their president who has failed in leadership, failed to lower unemployment, failed to rescue our economy, failed to prevent a downgrade of our debt,鈥� said Senator Paul, in a statement on Monday.
Both tea party lawmakers and their foes claimed justification for their side in the rationale offered by the ratings agency Standard & Poor鈥檚 for its decision to drop the US credit rating from the top AAA rate to AA+ on Friday.
Tea party critics focused on the S&P鈥檚 criticism that the 鈥減rolonged controversy鈥� over raising the statutory debt ceiling signaled that future deficit-cutting agreements, especially over cutting entitlements or raising revenues, would be 鈥渓ess likely.鈥�
Democrats blamed the tea party for political brinkmanship.
鈥淭his is essentially a tea party downgrade,鈥� said David Axelrod, President Obama鈥檚 top campaign adviser, on CBS鈥� 鈥淔ace the Nation鈥� on Sunday. 鈥淭he tea party brought us to the brink of a default.鈥�
Tea party-backed lawmakers, meanwhile, hailed S&P鈥檚 call for a more robust deficit-cutting plan. 鈥淪&P鈥檚 downgrade is a warning shot the whole world saw coming,鈥� said Rep. Jim Jordan (R) of Ohio, who chairs the Republican Study Committee, in a statement on Monday.
鈥淭inkering around the edges won鈥檛 solve the problem,鈥� he added. 鈥淓ven the Italians, with bigger debt problems than ours, are moving to amend their constitution to require a balanced budget. It鈥檚 time the US did the same.鈥�
In a controversial move, chairman Jordan had lobbied outside business groups in July to pressure Republican lawmakers to oppose the 鈥済rand bargain鈥� being negotiated between President Obama and House Speaker John Boehner (R) of Ohio. The plan aimed to cut at least $4 trillion over 10 years 鈥� a level that would have met the mark set by the ratings agencies. But the negotiations included deficit cuts on the revenue side that were unacceptable to conservatives.
Many tea party lawmakers said during negotiations that they would rather see the nation default on its debt, rather than fail to curb unsustainable deficits. In the absence of a grand bargain, Congress and the White House eventually agreed on $2.4 trillion in cuts only.
鈥淭he tea party had a shot at a big deal that avoided a downgrade, but rejected it because it included a tax increase, preferring to roil the markets,鈥� says Stan Collender, a longtime federal budget analyst and partner at Qorvis Communications in Washington.
鈥淪&P鈥檚 statement signals that the downgrade has nothing to do with America鈥檚 ability pay its debt,鈥� he adds. 鈥淚t鈥檚 all about the apparent unwillingness of the political system to deal with the problem. That only happened after the tea party got elected and held the debt ceiling hostage.鈥�
Meanwhile, Monday鈥檚 S&P announcement that it is also downgrading home mortgage giants Fannie Mae and Freddie Mac only reaffirmed the tea partyers鈥� conviction. 鈥淭he downgrades of Fannie Mae and Freddie Mac reflect their direct reliance on the US government,鈥� said S&P in a statement. S&P also lowered ratings for 10 of 12 Federal Home Loan Banks.
Sen. Jim DeMint (R) of South Carolina, an early supporter of tea party candidates, say that S&P鈥檚 latest decision is not surprising. 鈥淚t鈥檚 a reflection of their direct reliance on the US government, which has delivered the entities over $160 billion in endless bailouts,鈥� he said in a statement on Monday. 鈥淛ust last week, Fannie Mae requested an additional $5 billion taxpayer bailout.鈥�
鈥淭he president should do what conservatives who opposed the original mortgage bailout called for years ago: break up the mortgage giants and privatize them. Forcing taxpayers to prop up these failed entities hasn鈥檛 solved the housing crisis; it has prolonged it,鈥� he added.
Opposition to government bailouts was a rallying cry of the tea party movement in the 2010 election cycle. In late 2008, House Republicans initially voted down then-President Bush鈥檚 Troubled Asset Relief Program (TARP), but a 740-point drop in the stock market drove lawmakers to reconsider that vote and pass the bill.
Tea party lawmakers say they won鈥檛 be pressured by the markets to make a similar course change on the debt. It鈥檚 this willingness to take the nation to the brink of default 鈥� and beyond 鈥� that gave tea party so high a profile during debt talks. Critics say that stand shows no sign of shifting as Congress moves next month to the next phase of deficit reduction through a new joint congressional committee.
