The Obama Road: Downgrade...Watch for Rising Debt Whatever one thinks of the credit-rating agencies -- and we aren't admirers -- it serves no good purpose to shoot the fiscal messengers. Friday's downgrade by Standard & Poor's of U.S. long-term debt to AA+ from AAA will be the first of many such humiliations if Washington doesn't change its economic and fiscal policies. Investors and markets -- not any single company's rating -- are the ultimate judge of a nation's creditworthiness. And after their performance in fanning the credit and mortgage-security mania of the last decade, S&P, Moody's and Fitch should hardly be seen as peerless oracles. Their views are best understood as financial opinions, like newspaper editorials, and they're only considered more important because U.S. government agencies have required purchasers of securities to use their ratings. ... Yet is there anything that S&P said on Friday that everyone else doesn't already know? S&P essentially declared that on present trend the U.S. debt burden is unsustainable, and that the American political system seems unable to reverse that trend. This is not news. ... Despite S&P's opinion, there is no chance that America will default on its debts. The real importance of the downgrade will depend on the political reaction it inspires. If the response is denial and blaming the credit raters, then the U.S. will continue on its current road to more downgrades and eventually to Greece. What has already become a half-decade of lost growth will turn into a lost decade or more. If the response is to escape the debt trap by the stealth route of inflation -- a path now advocated by many of the same economists who promoted the failed spending stimulus of 2009 -- then the U.S. could spur a dollar crisis and jeopardize its reserve currency status. The better answer -- the only road back to fiscal sanity and AAA status -- is to reverse the economic policies of the late Bush and Obama years. The financial crisis followed by the Keynesian and statist revival of the last four years have brought the U.S. to this downgrade and will lead to inevitable decline. The only solution is to return to the classical, pro-growth economic ideas that have revived America at other moments of crisis." --The Wall Street Journal

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