Credit Downgrade Good for Obama?
Economist Peter Morici explains
- Duration 5:35
- Date Aug 8, 2011
Economist Peter Morici explains
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Asian stocks have already taken a tumble this morning after the United States lost its triple -- credit rating on Friday.
Now we're waiting to see how the US markets -- react to the first ever downgrade.
Right now the futures are way down our next guest says it may actually perhaps benefit.
President Obama during his -- to explain is Peter.
-- C a a business professor at the University of Maryland and former chief economist at the US international trade commission warned -- Peter.
Good morning do you do you see this as beneficial to the White House.
It depends -- -- the White House plays that.
You know right now they're bashing the S and they win this downgrade given the methodology they use and the fact that we only got two trillion in cuts instead of war was going to happen.
But the S&P specifically mentions political gridlock.
In Washington and the reluctance of the Republicans to cut taxes.
It doesn't mention that the Democrats won't cut entitlements so you know the president if they're lucky -- trying to do the right thing.
I want to raise taxes the Republicans well let me in the S&P says they didn't have a problem.
But I'm not I'm not agreeing with that analysis but I'm surprised they're not playing it that way as opposed to shooting the messenger.
Sure exactly although you know it Peter you you've been -- and -- Washington DC area have been -- for a long time you know that it George Bush words -- the United States right now the New York Times and having great big letters it's Bush's fault.
-- absolutely in effect right now.
Here in this past week I mean national public radio and the New York Times -- busy getting their apology machines and blame machines going as quickly as possible.
Ad nauseam and PR was doing -- -- on taxes taxes taxes you know at how much that that tipped bush tax cuts -- -- let's speak later.
The bush tax cuts are costing us -- course all income grades and 300 billion a year.
They're democratic increases and big increases in spending by the democratic congress are causing us one point one trillion.
It might not be entirely a spending problem but it's three quarters -- -- -- kid.
In the meantime -- you're talking about the spin machine on the Democrat side they have completely.
Tried to brand this the Tea Party downgrade the Peter.
-- the members of the Tea Party really the ones who got us focused and got Washington focused on the debt problem to Begin with.
Absolutely it might have been imperfect but the Tea Party had the courage to table a plan that addressed Medicare Medicaid and Social Security.
That then prompted eventually eventually after a long period of time in great hesitation the democratic senators to come up with something.
Right right which basically where the tea parties discretionary spending cuts but nothing on entitlements and Social Security now -- of the president's table.
Blank sheet of Paper from -- you know this whole downgrade is about the ratio between how much we -- And growth.
We're what we always growing too fast and we're growing too slow to the president doesn't have a growth program -- never minded -- that reduction program.
It only ever talks about his electric trains in Illinois from an electric cars I have you seen -- -- -- -- this president gets his economic policy at a Flash Gordon magazines great think about the future when we need to grow right now and He simply doesn't have a plan from other than to blame other people do you think it's curious that while this happened on Friday night the downgrade.
The present United States himself has not issued a statement we haven't seen him come out and -- they don't worry everything's gonna get better we're gonna work with congress not the well if you look at what is Sarah gets are saying on the various networks and you know we've all been been watching everyone from they're out there blaming the Tea Party they're out there attacking as simply.
They're blaming the Republicans in the terrible mess they left behind in the earthquake in Japan -- -- and -- can find the blame that's very unseemly for president to be doing.
You know he's basically using its attack dogs because He hasn't got basically the president isn't talking because He has nothing presidential to say well there you go -- Do you do you see this as -- Did S&P.
Do the right thing they -- they looked at all the facts and they -- him we just don't see this and working out for.
-- -- status or were they just trying to push.
Us in us meaning the United States into doing something about our gigantic debt.
Well -- that they don't try to push anybody into anything it's their job to assess what's going on.
They applied the methodology they apply to any country looking at your debt trajectory and you're expected rate of growth.
And they find both to be very disturbing -- the United States really getting in over its head over the next ten years okay so in that sense it was correct to downgrade us.
What they've what they missed though is the United States is not like any other country.
The bond market is not likely to validate this I don't think we're gonna pay higher interest rates just as -- and didn't because -- both -- friend.
-- reserve currencies moreover the Chinese are playing -- games of the currency and they gotta buy enough to keep interest rates low rate.
Exit question Tim Geithner has announced he's gonna stick around through the election -- good.
No I mean nobody really respects Tim Geithner.
And the fact that the president views it misses most valued economic advisor was valued advisor overall long and Hillary Clinton.
Doesn't speak well for the judgment of this president.
Or what this administration is going to give America going forward.
All right Peter -- -- from the University of Maryland we think you sir for getting up -- -- on this very busy very important moment.