Rana Foroohar reports some unsettling news:
Is this the first domino in the next global financial crisis? It’s possible. Today the S & P revised its long-term credit rating outlook for the U.S. from “stable” to “negative.” The immediate result has been a flight from risky assets and anything linked to optimistic views on global growth – gold and Treasuries are up, while oil and dicey currencies are down.
There’s not a lot of tea leaf reading required. S&P’s analysis comes right out and says it: “We believe there is a material risk that U.S. policymakers might not reach an agreement on how to address medium and long term budgetary challenges by 2013.” The debt ceiling, of course, is the most immediate concern. President Obama and Speaker Boehner might disagree on the conditions, but they’re both telegraphing this is a “how,” not an “if,” concern. The larger problem, illustrated by the skin-of-its-teeth 2011 budget deal, a yawning chasm between Paul Ryan’s and Obama’s fiscal visions, and little hope for a grand deficit-reduction bargain before election season, is that people are losing faith in the political process to actually address medium- and long-term deficits. That being said, Treasury bond interest rates are still low and a political problem is only as hard to fix as the obstinacy of political actors.