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Wednesday, August 10, 2011

The Downgrade -- Voices from The Royale

Posted By on Wed, Aug 10, 2011 at 10:20 AM

Somebody clearly messed up. But who will take the blame?
  • Somebody clearly messed up. But who will take the blame?
After S.& P. downgraded America's credit rating from AAA to AA+, the political strategy on both sides of the aisle was clear: Blame the other guys.

The irony of the situation, of course, is that Monday's stock market dip, partially sparked by the downgrade, caused a mild panic that sent investors shoveling their money into the safest investment in the world: freshly-downgraded U.S. Treasury bonds (justifying the criticism levied at S. & P.). So from a financial standpoint, the downgrade was virtually meaningless. But it still possesses weighty political value.

So there was Obama's campaign strategist David Axelrod and Senator John Kerry declaring the "Tea Party Downgrade." And there was Senator John McCain and the Republican National Committee proclaiming the "Obama Downgrade."

Controlling The Downgrade Narrative is crucial. It is one of many battles to come for control of The Struggling Economy Narrative, which will frame the 2012 elections.

So in this week's Of the People, the people at The Royale shared their knowledge. Is President Obama's outrageous spending responsible for The Downgrade? Or is the Tea Party's reckless extremism to blame?

"I think there's too much politics in politics," says Kevin L., after finishing a crisp brown pint at the bar. "We lose. I think a lot of what happened is because they're focused on the upcoming election. It's fairly disappointing."

Kevin, who is in sales, blames the downgrade not on one of the parties, but on an overall dysfunction in Washington, which S. & P. cited as a major factor in their decision.This echoes populist opinion, as last week's New York Times poll showed that the American public is overwhelmingly (82 percent) dissatisfied with Congress as a whole (and, to a lesser extent, President Obama). The question becomes whether one of the parties is able to channel this frustration toward the other party.

So Democrats would be happy to hear that Amy R., an artist and art instructor, blames the Tea Party for the downgrade. She admittedly isn't a politics buff, but neither are many other voters. Yet she connects the downgrade and the current fiscal strife to the Tea Party wave in the midterms.

"Inexperience and popularity isn't getting the job done," says Amy, who is sitting in the patio area with book in hand and a light gold pint on the table.

Amy's perspective strikes at the heart of the fight for the economic narrative. If the economy gets noticeably better by November 2012, Obama's re-election chances dramatically increase. But if the economy continues to slide, the question becomes whether voters will blame the President or the Republicans who took control in 2010. Republicans will say that the economy has barely improved under Obama and that his spending habits got us in debt problem. And that he promised eight percent unemployment and hasn't delivered. Democrats will say that the economy was steadily improving until the Republicans came in and gridlocked government. And that the stimulus package (a.k.a. government spending) halted the recession and spurred growth. And that the auto manufacturers bailout successfully got the industry back on its feet.

The political ramifications of the downgrade will likely correlate to how the public perceives its impact on the economy. Because, as Amy suggests, its pragmatic meaning is vague and wonky.

"I feel uneasy but I don't know why," she says. Then, with a grin, she adds, "I don't know how it affects me. I don't have any money."

Kevin believes that the significance of the downgrade is more symbolic than economic-- that it represents America's transition from proud global superpower to a more humble and domestically-focused nation. He notes that the recession has helped the country recalibrate its priorities: household debts are shrinking, people are more likely to support local small businesses over corporate franchises, and public support for domestic initiatives is eclipsing public support for financing wars.

"I think we'll be fine in the long run," he says.

In a political climate defined by successive crises and panics and clashes, this seems to be the one narrative suppressed by all sides.

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