The RP’s Budget Crisis Update- August 10

Washington Democrat Patty Murray will likely be the Senate co-chair of the new bipartisan committee tasked with reducing the US deficit.

On a deadline to appoint members to the bipartisan Super Congress by next Tuesday, August 16, Senate Majority Leader Harry Reid appointed Patty Murray of Washington, Max Baucus of Montana, and John Kerry of Massachusetts to the panel, designating Murray as co-chair. Murray, currently head of the Democratic Senate Campaign Committee and a senior member of the Senate’s Budget Committee, is expected to chair the new committee, formally known as the Joint Select Committee on Deficit Reduction, alongside a yet-to-be-named House Republican. Baucus was selected for his position as chair of the Finance Committee (and he has been a member of several bipartisan coalitions, including the original Gang of Six in 2009), while John Kerry, who was the party’s 2004 Presidential nominee, was chosen because of his seniority within the caucus. [National Journal]

Following its near-catastrophic 634-point drop the day before, the Dow Jones Industrial Average rallied by 429 points (3.98%) on Tuesday. Mirroring its rise was a 4.7% increase in the S&P 500. Price levels had been inconsistent over the course of the day, with the final surge resulting from the Federal Reserve Bank’s mid-afternoon announcement that interest rates would remain very low through the middle of 2013. Early Wednesday trading saw increases in stock indices in Japan, South Korea, and Australia. [NY Times]

Following Standard & Poor’s decision to downgrade United States debt from AAA to AA+. the Securities and Exchange Commission has released, in part through an 84-page letter to S&P, guidelines on changing rating agencies’ reporting requirements; perhaps unsurprisingly, S&P has not reacted well to the proposal. Notably, the regulations would require such groups to state publicly and on their website when an error has been found in their calculations. This particular stipulation has been met with ire from Standard & Poor’s in large part because the US government has accused the agency of making a $2 trillion error in its calculations that the Treasury Department believes should have affected the decision to downgrade American debt. The entire set of regulations is 517 pages long and is more broadly aimed at reforming the ratings agencies that massively overestimated the dependability of certain loans in the months and years leading up to the 2008 fiscal crisis. [Reuters]

In a moment of stunning irony, the S&P downgrade may have brought some level of bipartisan agreement to the halls of Congress. Members from both sides of the aisle, including some with ideologies as disparate as those of Darrell Issa (R-CA) and Dennis Kucinich (D-OH) are calling on investigations as to the why and wherefores of the downgrade decision, including whether or not S&P may have benefited from it. Overall, the consensus seems to be that ratings agencies should play a smaller role in the United States’s government and economy. [Wall Street Journal]

In other government dysfunction news, the results of the Wisconsin State Senate recall elections are in, and though Republicans will maintain control of that body, Democrats have picked up two seats in that body, though they may lose more as two Democratic senators are up for recall elections on August 16. Although the results are, on the surface, a loss for Wisconsin Democrats, there has been speculation that the close results of some races may bode well for an effort to recall Republican governor Scott Walker [MSNBC]


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