On the Tuesday after S+P downgraded US debt from AAA to AA+, the dominoes continue to fall. The national spectacle of the debt crisis debate is rippling in a way which will make it hard for anyone to claim that the embarrassing debt ceiling show was not a big deal. Maybe you can argue it shouldn't it have been, But guess what, it turns out that perception DOES matter. Oopsie! And the perception is that our nation simply doesn't have its shit together.
This is about our government's large and undiminishing gap between revenues and expenditures. As it relates to both our credit and our fiscal sustainability, no one outside the US really cares what pastiche of polices are used to close the gap. They just care that we close it. That means both liberal and conservative sacred cows (social security, medicare, no new taxes) need to go up on the block.
The most noticeable trend in the immediate aftermath of the downgrade has been an increased flight to quality and security: to gold, and into the currencies (and bonds, probably, if there are any) of countries with sound balance sheets. For the time being, american treasury notes are still among the cleanest dirty shirts in the opinions of investors. But this downgrade has clearly made global investors substantially more committed to shopping for clean shirts. This is the end of the beginning of the realization that America needs to live within its means.
Countries that produce more than they consume won't keep propping us up. We're clearly operating on borrowed time, no pun intended. I am deeply pessimistic that our current congress can come up with any solutions that amount to more than inadequate half measures coupled with WIMPY promises that they'll gladly pay us tuesday for a hamburger today.
What we all need to do as Americans is to let BOTH PARTIES know that they are sadly mistaken if they think we're going to just keep ping-ponging between their nitwit paddles. Republicans and democrats have never been more in the way than they are today.