Treasury Secretary Timothy Geithner dinged Standard & Poor’s for “terrible judgment” in downgrading the federal government’s credit rating. Less genteel liberals offered less flattering assesments. “[I]t’s hard to think of anyone less qualified to pass judgment on America than the rating agencies,” opined Paul Krugman. “The people who rated subprime-backed securities are now declaring that they are the judges of fiscal policy?”
Media Matters proclaimed, “Attention media: S&P lacks credibility.” Michael Moore looked up from his corn dog to muse that President Obama should have the rating agency’s CEO arrested. Some political observers dredged up the January 2011 Financial Crisis Inquiry Report’s finding that “the failures of credit rating agencies were essential cogs in the wheel of financial destruction,” specifically identifying S&P as one of the “the failures of credit rating agencies were essential cogs in the wheel of financial destruction.”
But the rating agencies’ failure was to exaggerate the creditworthiness of rickety financial institutions and securities, giving out favorable ratings like candy. That history doesn’t seem to help the U.S. government’s case, especially since one could just as easily argue that past credit ratings have been overly generous given how deeply in debt we find ourselves.
One area where the critics of the downgrade have a point is that S&P engaged in, as George Will put it, “a kind of half-baked political analysis criticizing the American system of government.” As dysfunctional as our political class has become, the Founding Fathers built a certain resistance to change into the system. When decisive action is needed, some might look askance at the checks and balances that both parties skillfully wield against one another.
Yet blaming the American system would somewhat miss the point. It is the wholesale abandonment of the Constitution, particularly the doctrine of enumerated powers, that has led to our current predicament. In place of the Constitution bequeathed by our Founders, we have an unwritten constitution that has turned our government into what some liberals describe as an insurance company with a (soon to be much smaller) army.
The federal government has usurped the power to regulate wholly intrastate economic activity, or even inactivity in the case of purchasing health insurance, perversely claiming the interstate commerce clause makes it right. Washington now unofficially amends the Constitution by precedent, so that past violations can be used as future proofs of constitutionality.
We have also created an expensive web of entitlement programs rooted in no enumerated power of the federal government, which we find ourselves powerless to reform even as they stand at the precipice of insolvency. FDR once bragged that “no damn politician” would ever be able to touch Social Security. So far, recent political history has proved the old New Dealer right.
Without the strictures of constitutional government, the American people find themselves laboring under obligations they never freely chose. In fact, millions now give the fruits of their labor to support entitlement programs that may well be bankrupt by the time they are eligible to draw benefits from them. They will come of age as the Ponzi scheme runs it course and the bills come due.
Idealistic politicians — some of them in positions of influence in this Congress — may try to rein in the spending or make the obligations more realistic. But politics doesn’t offer much incentive to risk making voting recipients of government benefits angry right now in order to solve future problems. And even the Republican-controlled House owes much of its current majority to demagoguery about the government monkeying with old people’s Medicare.
The end result is a set of political choices that are in a way more constricted than those offered by the original Constitution, which could at least be amended. Attempts to amend the programs that are the main drivers of our debt may well be a political kamikaze mission. The people know they can vote themselves funds from the public treasury, a system very different from what the Founding Fathers envisioned and which is now collapsing under the weight of its own contradictions.
Aside from a Democratic “deem and pass” here or a Republican McConnell plan there, the procedural restraints of the Constitution, the ones that limit the pace of political change, are mostly observed. But the substantive restrictions the Constitution imposes on the political class, the parts that limit what government can do, are almost completely ignored.
It is those restraints that could have kept the country off a financially perilous path. Unfortunately, the outlook for constitutional government was downgraded a long time ago.
