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Who's downgrading America?

| Wednesday, Aug. 10, 2011

The decision by Standard & Poor's to strip the United States of its AAA credit rating has triggered a barrage of catcalls against the umpire from the press box and Obamaites.

S&P, we are reminded, was giving A ratings to banks like Lehman Brothers, whose books were stuffed with suspect subprime paper, right up to the day Lehman Brothers fell over dead. Moreover, S&P made a $2 trillion error in its assessment of U.S. debt and used political criteria in making its downgrade.

All of which may be true. But none of which is relevant.

This downgrade is deeply deserved. For no one believes the United States is going to pay its creditors back the $14 trillion it owes them, or the $21 trillion it will owe them at decade's end, with dollars of the same value as those the United States is borrowing today. In the last year alone, the U.S. dollar has lost 30 percent of its value against the Swiss franc.

On "Meet the Press," Alan Greenspan insisted that the United States is not going to default. Why not• Because our debt is denominated in dollars, and we can print dollars to pay off our creditors. Which is pretty much what Chairman Ben Bernanke and the Fed have been doing.

Why are the Chinese so upset• Because they are sitting on more than $1 trillion in U.S. bonds and Treasury bills bought with dollars we paid them for Chinese-made goods, while the purchasing power of the dollars those bonds and T-bills represent withers away.

"I believe this is, without question, the 'tea party downgrade,'" says Sen. John Kerry.

How so• Because the tea party blocked the big deal President Obama sought to cut with House Speaker John Boehner to resolve the deficit-debt crisis.

The president, we are told, was prepared to accept $3 trillion in reduced spending for entitlements like Social Security, Medicare and Medicaid, but the tea party caucus refused to let Boehner agree even to $1 trillion in "revenue enhancement."

But if the president believes entitlement reform is essential to get America's deficit-debt crisis under control, why does he need tea party cover to do his duty?

He doesn't. Tea party intransigence on taxes is not the reason for Obama's failure to cut spending. It is his excuse.

Indeed, if Obama announced tomorrow that he was going to cut spending on entitlements by $3 trillion to restore our AAA credit rating, he would have the full support of the tea party. His opposition would come from Kerry's colleagues in the Senate and Nancy Pelosi's in the House.

If Obama wishes to restore the AAA rating of his country, he might consider two bold steps, both consistent with his professed beliefs.

First, tell Republicans that if they will not agree to revenue enhancement, he will nonetheless do his duty and pare back spending in entitlement programs. Following this, he could go to Republicans and tell them that if they agree to eliminate the clutter in the tax code -- exemptions, loopholes, deductions -- he will agree to cut tax rates for individuals and corporations alike, to make America more competitive.

For both, he would have the support of Republicans and the tea party. It might even advance his re-election prospects, if he could get renominated by his own party, which would rebel at both reforms because they would mean a suspension of the politics of tax and spend.

As for the S&P downgrade, the only surprise is it didn't come sooner.

Pat Buchanan is the author of the book "Churchill, Hitler and 'The Unnecessary War.'"

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