S&P Credit Downgrade Shows American Un-Exceptionalism

The S&P credit downgrade just shows that America is no longer an exceptional nation.


So how's that "American exceptionalism" thing working out for ya?

Rating agency Standard & Poor's last week offered a contrarian take on what right-wing elites, from shadow presidential contender Sarah Palin to declared candidate and dangerous nut Newt Gingrich describe as the nation's divine entitlement to tell the world to get stuffed. Blessed with the Lord's pleasure and the world's reserve currency, so goes the exceptionalist narrative, there is no international norm or convention Washington cannot flout, either by waging unnecessary wars or by swamping the global economy under the weight of a giant and unsustainable housing bubble.

The S&P decision to downgrade America's triple-A sovereign debt rating confirmed that America is indeed exceptional: exceptionally parochial, indebted, and paralytic. This was a gross intrusion on the exceptionalist conceit embraced as an article of faith by Republican Party leaders. After all, how exceptional can a country be if a minority of its lawmakers cannot leverage the threat of national default as "political bargaining chips," as the S&P downgrade report put it, without censure by some officious global credit cop? In particular, by changing the country's long-term outlook from positive to negative, the agency effectively associated the United States with Belgium, which early this year set the record for the longest period a country has gone without a government, or with Egypt, which is in political limbo six months after the ouster of dictator Hosni Mubarak. [See a collection of political cartoons on the budget and deficit.]

Apparently, if there is anything exceptional about America today, it is that the trajectory of its mountain of debt is diverging from the developed world's other heavily indebted states. According to the S&P report, the four countries left with triple-A ratings—Canada, France, Germany and the U.K. are estimated to reduce their sovereign borrowings by 2015 even as America's is forecast to grow during the same period.

Beltway carping about the way in which S&P and other ratings agencies gave top grades to corporate bonds they knew were junk during the bubble years is disingenuous, coming as it does from the very lawmakers, financial mandarins and pundits who either failed to anticipate the financial crisis or were well within its circle of complicity. However shocking was the downgrade in Washington, reaction on Wall Street ranged from resignation to a vague sense of relief that someone out there "gets it." Brad Hintz, Equity Research Analyst at Sanford C. Bernstein and one of the smartest people on Wall Street you've never heard of, called the anti-S&P sniping in Washington "political theater" and saluted the agency for its "brave" decision to downgrade. [See the finance and credit industry's favorite lawmakers.]

Decades ago, when America boasted world-class infrastructure, good schools, an expanding middle class, and domestic and foreign policies that matched commitments with resources, the nation was exceptional and it spoke for itself. Today, there is an illusion of American exceptionalism that is confined largely to the minds of a self-appointed, militaristic priesthood. That's the good news. The bad news is that the way things are going, any one of its elites could be a hubristic fantasy away from the White House in 2012.

A paradox of the modern Republican Party—more a cult than a political organization, and one the likes of an Eisenhower or even the tax-and-spend Reagan would not recognize—is that its romance with exceptionalism is antithetical to the letter as well as the spirit of the Founders' vision. It is the Declaration of Independence, that most secular of manifestos with its artfully abstract reference to "Nature's God," that declares all men are born equal. It is as easy to square such a humanist ideal with the fatwas of American exceptionalism, the Indispensable Nation or, for that matter, the "chosen people" as it would be for a camel to pass through the eye of a needle. Far more respectful of Jeffersonian ideals would be to appreciate that people and the governments they elect are as intrinsically flawed as they are capable of redemption.

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