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A fiscal downgrade shakes the political landscape

This week's downgrading of the U.S. government's fiscal condition by Standard and Poor's sent shock waves through the financial and political world. Stock markets tumbled while politicians either tried to dismiss it or hold it high as a sign that times have changed in the good old U.S. of A. No matter how you analyze it, however, the tremors the announcement sent out will undoubtedly ripple through political landscapes at the international, federal, and local levels—and when the shaking's done, we'll see what and who's left standing.

Standard and Poor's is a firm that rates the fiscal reliability and outlook on everything from stocks and bonds to businesses and governments worldwide. Of the 127 nations they rate, only 19 have received their AAA rating, with the U.S. being one. While the S&P analysts didn't downgrade the U.S. rating, for the first time in history they changed the outlook for the federal government's fiscal condition from "stable" to "negative."

That change, and the potential for losing the AAA rating, means that the government's ability to borrow money may be in jeopardy. Should the rating be downgraded, it will cost much more for the United States to borrow money because the risk will be greater that it may default on loans. Considering that for every dollar the federal government and Congress are spending right now, 40 cents is borrowed money–much of it from China–that's no small threat.

Even having the word "default" in play is a very big deal on the international financial scene, where government fiscal crises are cropping up at an alarming rate. Iceland, Portugal, Spain, Greece, and Ireland have all been candidates for or actually received international monetary bailouts recently. The harsh reality of the recession and the massive federal debt now casts doubt on our nation's ability to rein in government spending and climb our way out of the $14 trillion hole into which our free-spending Congress and federal government have plunged us.

President Obama and the White House have predictably attempted to downplay the new outlook. After all, with elections barely more than a year away, the last thing Obama needs is the specter of fiscal instability staring American voters in the face. Falling back onto the same rhetoric he has already overused, the president lauds what he calls "bipartisan cooperation" to reduce federal spending by trillions in the decade ahead. But after a brutal budget battle that barely avoided a government shutdown in recent weeks, bipartisan cooperation is more a presidential wish than reality in the halls of Congress.

What S&P's new assessment will undoubtedly do is add fuel to the spending-reduction fire so fondly being stoked by the Republican Party and its radical Tea Party wing. Dim-bulb luminaries like Sarah Palin are already on the stump for far greater reductions in federal spending and are unlikely to slow down anytime soon. With an undeniable political victory in forcing Obama to accept a $33 billion reduction in current fiscal year federal spending, you can bet that calls to cut Social Security, Medicare, and Medicaid will soon be added to a chopping block still dripping with the hacked remains of family planning and funding for environmental regulation. Toss in the need to raise the national debt ceiling in the coming month and suddenly, even as Democrats control both the Senate and White House, it appears the Republican majority in the House will be in the driver's seat on federal spending.

What the right-wingers won't be talking much about is the insane levels of military spending of which they're so patriotically fond. But consider this: military spending in the United States has increased by 80 percent in the last decade. Since we're the world's only remaining military superpower, one might wonder why we needed to almost double spending on the military. How many aircraft carriers and nuclear submarines can we use? How many tanks, jet fighters, and bombers do we really need when every one of our nation's ongoing wars is primarily fought against armed insurgents who are impossible to distinguish from civilians? Does anyone believe we need more than 800 military bases around the world for our defense?

Unfortunately, Obama has bought into the wars and the military spending, leaving Americans seeking real deficit reduction with few allies. His position, besides strengthening the arguments of his political opponents, leave his own party and base fighting cutbacks to programs that actually serve Americans instead of the profit motives of the military-industrial complex. The result? Rather than clarifying our nation's muddy future, we're left stranded in uncertainty while the fiscal Sword of Damocles dangles above our heads.

Closer to home, this news will not go unnoticed by government budget cutters. Even as Montana's 2011 legislative session crawled to its demise, the House suddenly decided to reconsider a measure that would borrow $97.8 million for new state construction. The bill will only authorize the spending if state revenues exceed projections by $35 million dollars, and with $4-a-gallon gas becoming more frequent across the nation and a federal government in fiscal distress, exceeding revenue projections looks far more optimistic than realistic.

And so the stage is set for calamitous debate at all levels of government over future spending. Toss in 78 million baby boomers moving from revenue producers to revenue consumers and the situation only grows more dire. The big spenders from all sectors are on thin ice, while those hoping to preserve real services for citizens face yet another hurdle. How it will play out is anybody's guess, but one thing seems likely: In both our state and nation, things are shaking all over as we face a future that, in the blink of an eye, is now uncertain.

Helena's George Ochenski rattles the cage of the political establishment as a political analyst for the Independent. Contact Ochenski at

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