While the markets don't give a fig about S&P's analysis of the creditworthiness of US debt, it does appear to fear that governments will be pushed to follow S&P's bad economic advice:

The downgrade of the United States’s debt to AA+ from AAA has global implications, said Alessandro Giansanti, a credit market strategist at ING in Amsterdam. “We can see that this may force the U.S. to move more aggressively to cut spending,” he said, something that could drive the already weak economy into recession and weigh on the economies of all of its trading partners. “That’s the main driver” of the stock market declines, he said.

Krugman makes a similar point:

Unless someone misread the S&P downgrade and it downgraded the global equities market, much egg on the face of the clowns at S&P, as the yield on benchmark 10-year US Treasury is now lower than prior to Standard & Poor's downgrade.

S&P spoke, and nobody cared. This should be the end of S&P's sovereign debt ratings. When no one pays attention to you, what's the point?

Open Thread.

Via Krugman, Treasury skewers S&P:

In a document provided to Treasury on Friday afternoon, Standard and Poor’s (S&P) presented a judgment about the credit rating of the U.S. that was based on a $2 trillion mistake. After Treasury pointed out this error – a basic math error of significant consequence – S&P still chose to proceed with their flawed judgment by simply changing their principal rationale for their credit rating decision from an economic one to a political one.

[. . .] S&P’s $2 trillion mistake led to a very misleading picture of debt sustainability – the foundation for their initial judgment. This mistake undermined the economic justification for S&P’s credit rating decision. Yet after acknowledging their mistake, S&P simply removed a prominent discussion of the economic justification from their document. In their initial, incorrect estimates, S&P projected that the debt as a share of GDP would rise rapidly through the middle of the decade, and they cited this as a primary reason for a downgrade.

Clowns. As Treasury says, "[t]he magnitude of this mistake – and the haste with which S&P changed its principal rationale for action when presented with this error – raise fundamental questions about the credibility and integrity of S&P’s ratings action."

Speaking for me only

What's An S&P Sovereign Debt Rating Worth? We are about to find out:

The United States lost its top-notch AAA credit rating from Standard & Poor's on Friday, in a dramatic reversal of fortune for the world's largest economy. S&P cut the long-term U.S. credit rating by one notch to AA-plus on concerns about growing budget deficits.

S&P stands alone here, as Moody's and Fitch did not downgrade US debt. I think we will see that no one cares what S&P thinks about sovereign debt.

Speaking for me only

The Bureau of Labor Statistics reported that the United States economy had a net gain of 117,000 jobs, and upwardly revised job reports for May and June. The headline unemployment rate dropped by a tenth to 9.1%. The New York Times front page headline states that US Posts Solid Job Gains Amid Fear. It's story has the more accurate headline US Posts Stronger Job Gains Amid Fear.

Today the talk will be how things are not as bad they seemed. This is the Era of Diminished Expectations. While certainly a +117k jobs number in July is better than the May and June numbers, it is simply not good enough. Indeed, it is a sign, in my estimation of continued economic weakness. But because our expectations have been diminished, a number that would have been worrisome in May, now is cause for relief. This is bad for policy. It leads to government doing nothing about the jobs situation. It is bad politically for the President because people do not vote today on his reelection, or even this November. The President will come out today at 11 and tout this number. Sure, he'll say we have to do better, but he will say we are on the right track. We aren't. More. . .

The Dow Jones Industrial Average plunged 350 points this morning and 830 points in the past two weeks. Stocks are tumbling. The S&P Index is also down. More here. What's the cause? The LA Times says:

The debt ceiling debate, economic reports and Europe's government-debt crisis contribute to Wall Street losses.

Nice going, Congress and President Obama.

The ink isn't even dry yet on the horrid compromise budget bill which was supposed to shield Medicare beneficiaries, but already there's renewed talk of raising the eligibility age for Medicare, which now likely will happen since Obama has already said it's okay with him. It will probably be one of the first things the gang of 12 congressional henchman will agree on.

The Wall St. Journal today: [More...]

They passed 60 votes, the Debt Ceiling bill is passed. Dems voting no: Sen. Harkin and Lautenberg. Dems voting yes included Udall, Bennett, Boxer, Feinstein and Franken.

The Senate votes at noon on the debt bill. 60 votes are needed. Obama will speak at 12:15.

You can watch the vote here on C-Span2 and Obama on C-Span.

The White House Fact Sheet on the bill is here.

Tired of reading bullet points and opinions as to what's in the budget deal? Here's the Congressional link to the text of of the 74 page bill.

Medicare isn't mentioned until page 51. All it says is: [More...]

Now that the Beltway is satiated with their Debt Ceiling Follies, consider this:

Stocks on Wall Street briefly followed European and Asian financial markets higher Monday, but any relief over the last-minute agreement on a framework in Washington to raise the United States debt limit was short-lived. After a short burst that put the three main Wall Street indexes up more than 1 percent, they turned negative as the reality of the challenges ahead for the recovery caught up with investors.

The dip coincided with the release of new data that showed American manufacturing growing more slowly. [. . .] “Now that the debt-ceiling deal, assuming it passes, has averted an imminent catastrophe, attention can return to the underlying state of the economy,” said Nigel Gault, the IHS Global Insight chief United States economist. “The news there isn’t good.”

(Emphasis supplied.) Which explains why we are cutting government spending of course. Insanity from the VSP.

Speaking for me only

It's a done deal with Congressional leadership, says Obama.

The "bipartisan" deal will be unveiled tomorrow, in all it's glory (not.) You can still make your voice heard. Harry Reid says:

"To pass this settlement, we'll need the support of Democrats and Republicans in both the House and Senate. There is no way either party, in either chamber, can do this alone."

What did Boehner tell Republicans tonight?

“There is nothing in this framework that violates our principles," Boehner told House Republicans. "It’s all spending cuts."

Here's the slideshow of Boehner's presentation.

What did Obama say?

Despite what some in my own party have argued, I believe that we have to make some modest adjustments to programs like Medicare, to make sure they are still around for future generations."

You can watch Obama's statement here. The full text of his comments are here. [More...]

Nancy Pelosi says the Dems are withholding judgment and may or may not support the deal.

From the Progressive Change Campaign Committee (via the WSJ):

"Seeing a Democratic president take taxing the rich off the table and instead push a deal that will lead to Social Security, Medicare, and Medicaid benefit cuts is like entering a bizarre parallel universe--one with horrific consequences for middle-class families.

Via the National Journal: Boehner is holding out for less defense cuts, and Dems are claiming they want to protect Medicare and Social Security: [More...]