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Community Commentary: Why Obama doesn't care about the U.S. credit rating

September 22, 2011|By Chriss Street

Just when the world financial markets had seemed to stabilize after five weeks of the violent convulsions caused by the first credit downgrade in the history of the United States, Standard & Poors announced the U.S. remains on negative credit watch, and there is now a 1-in-3 chance of another credit downgrade.

S&P understands that the president has been politically successful when he refused to cut spending and let the world suffer massive financial losses when S&P downgraded. It appears to be in President Obama's political interest for America to suffer another credit downgrade crisis.

The new S&P warning follows Obama's efforts to sabotage bipartisan cooperation on the "Supercommittee" deficit reduction panel by making confrontational demands for half of a trillion dollars more in stimulus spending and trillions of dollars of new class warfare tax increases on investment and charity.

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Most investors prior to Aug. 5, assumed that the president would be so afraid of voter wrath if the U.S. credit rating was downgraded that he would wait until the last moment possible before agreeing to just enough Republican spending cuts to save the AAA rating.

Those assumptions turned out to be very expensively wrong. Obama refused to make any last-minute cuts, then calmly left the Capitol for a family vacation on Martha's Vineyard. On the next trading day, markets around the world suffered $2.5 trillion in losses. The New York Stock Exchange is off 11% from its recent highs, but China's Shanghai Exchange is down 28% and Germany's DAX exchange is down 26% from their highs.

Investors mistakenly assumed President Obama's opinion polls would suffer from a downgrade.

According to the Gallup Poll; Obama maintains the same 43% voter approval level he held from before the crisis. But Congress hit a new all-time low approval rating of 13% during the crisis.

On the eve of the first meeting of Congressional Supercommittee, the Obama administration leaked to the New York Times its demands for millionaires to lose the favorable tax treatment on capital gains, municipal bonds and charitable donations.

This political poison pill to bipartisan cooperation is affectionately referred to as the "Buffett Rule," in a honor of Warren E. Buffett, the billionaire investor who has complained repeatedly that the richest Americans generally pay a smaller share of their income in federal taxes than do middle-income workers, because investment gains are taxed at a lower rate than wages.

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