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The S&P Downgrade and the "Week of Woe" - Commentary by Atlas Liberty Quoting LP Vice Chair Rutherford

Libertarian Party Vice-Chair Mark Rutherford is quoted in Atlas Liberty PAC's release on the S&P credit downgrade (posted by Atlas Liberty on Sunday night, August 7, 2011):

A Libertarian Perspective on the August 2011 “Week of Woe”

The news headlines last week were unlike any we’ve seen before: “S.& P. Downgrades U.S. Debt Rating for the First Time”.

The Democrats and Republicans who have been at the helm for the past 40 years have wrecked the U.S. economy, as evidenced by last week’s S&P downgrade of the U.S. credit rating, the selling off of global equity markets in the fear of a “double-dip” recession, and the failure to resolve any long-term structural problems with the U.S. budget.

The past week will go down in U.S. financial history as one of the most dramatic.

On Tuesday August 2nd, after a wrenching battle in Washington, President Obama and Congress agreed to a budget package that raised the debt ceiling by $2 trillion, and formed a committee to propose spending cuts by November of this year.

Then on the following Thursday, reacting to this news and the fear of a new global economic slowdown, stock markets worldwide dropped to their lowest levels since 2009 and their biggest single-day drop since 1998.

Finally, in the evening of that Friday, Standard & Poor’s, one of the premier rating agencies in the world, downgraded U.S. sovereign debt for the first time since the agency’s inception in 1917.

Not one, but two credit rating agencies have already downgraded their opinion of U.S. sovereign debt. Egan-Jones, a well respected credit rating agency, had already downgraded the U.S. rating as of July 16th. They cited “...relatively high level of debt and the difficulty in significantly cutting spending,” as their reason for the downgrade. Other agencies may follow in a “you go, I go” fashion. [1]

Moody’s, another major rating agency, has already stated that over 7,000 municipalities with financing arrangements tied to Treasury securities are in danger of an automatic downgrade if the U.S. loses its top-rating. [2]

For the average consumer, the threat of interest rate hikes for credit purchases of any thing from credit cards to home and car loans and student loans will be more real. The economy has been dependent on cheap credit for so long that an economic slowdown in what appears to be a double-dip recession becomes more likely. The cost of borrowing for small business, already devastated by the Great Recession, will increase. This will crimp their cash flow and make it much harder for them to justify new capital expenditures and other investments that would create jobs.

A recent poll put Congress’ approval ratings in the mid teens, a record low. [3] This will only continue, especially as the average American’s financial choices become tougher.

A generation of out of control spending, partisan budget battles and empty rhetoric brought us to the events of the past two months, a situation that’s likely to continue for the next two to four years. Coincidentally, Libertarians have been railing against economic profligacy for that entire period.

We are now seeing up close how larger, ever expanding government affects the basic prosperity of the American citizen.  But for 40 years, the Libertarians have been advocating a smaller-government solution.  

Mark Rutherford, Vice-Chair of the national Libertarian Party states:

The solutions are simple to muster, simply spend less. The political change is hard.  I implore you not to vote out of anger or fear, but instead out of reason. Look for and support the people, causes, organizations and candidates that are really fighting for our economic, political and social freedoms.”

The two Parties that have been running this country have failed to govern responsibly and are dysfunctional. This is America’s bipartisan problem: the two parties in power increasingly consume taxpayer money to grow the government rather than to improve our economy. There can be no excuses for the lack of action in Washington as politics have become increasingly polarized over the past few decades.

It is time to consider a different direction. The Libertarians offer that new vision of leadership and the principles to make that happen.

Join us in our mission. Get involved today with the National Libertarian Party, your State and County Party as well as groups like Atlas Liberty.

In November 2012, let’s work to make the headlines once again unlike any we’ve seen before: “LIBERTARIANS SWEEP POLLS!”

In Liberty,

Evan McMahon,
Executive Director
Atlas Liberty PAC

References
[1] Bloomberg, “Egan-Jones Cuts U.S. Rating to AA+ on Spending-Cut Concern”
http://www.bloomberg.com/news/2011-07-18/egan-jones-cuts-u-s-rating-to-aa-on-spending-cut-concern-1-.html

[2] Wall Street Journal, “Downgrade Poses Challenge for Local Governments“, http://online.wsj.com/article/SB10001424053111903366504576492032031492642.html?mod=WSJ_article_LatestHeadlines

[3] CNN/ORC International Poll, August 1, 2011
http://i2.cdn.turner.com/cnn/2011/images/08/02/rel12a.pdf