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If I knew that I'd be a rich man. 

Credit rating agencies are supposed to advise investors as to safety of a security -- whether they're likely to be repaid. Credit rating agencies have no authority -- or reason -- to get involved in deciding by how much or how or when a nation's debt should be reduced. S&P went way beyond bounds. 

Unfortunately, many worldwide creditors do pay attention. Some are required by law to do so. But you're right -- given S&P's poor track record, there aren't many rational grounds for paying a lot of attention. 

Yes -- the only real threat that the US won't pay its creditors in the future is the possibility that tea-party Republicans will do at the end of 2012 what they did recently, and hold such payment (that is, an increase in the debt ceiling) hostage to their political demands. Had S&P based its downgrade on this danger, at least S&P would have had some understandable and legitimate rationale. 

The Fed has proven that almost-zero interest rates, even coupled with "quantitative easing," has little effect. I think that's because both are analogous to pushing on a wet noodle. Big corporations already have all the capital they need, as does Wall Street, and wealthy individuals. Smaller businesses and average people can't get capital because banks are reluctant to lend. So monetary policy won't and can't work. What's left? Fiscal policy. President Obama and the Democrats have to go to the nation with the truth -- that we need a large fiscal boost this year and next. 

No one is talking about additional tax dollars. We're talking about boosting the economy through additional spending and tax cuts on the middle class -- which will generate faster growth and thereby reduce the ratio of debt to GDP. 

China is sending us a signal. It doesn't want the dollar to drop and for its huge holdings of US dollars to decline in value. It would much rather we fixed our long-term debt problem. It also doesn't want to be blamed for the current mess we're in. 

No. The heart of the issue right now is lack of sufficient aggregate demand -- consumers, businesses, government -- to get the economy going. And if consumers can't and businesses won't (they won't without consumers), the near-term responsibility shifts to government. Our "bad governance" is an inability or unwillingness to stimulate the economy as much as it needs. 

Obviously I don't know what he will say. What he should say is: We don't have a debt crisis right now. We have a jobs, wages, and growth crisis. And I'm going to ask Congress to approve my jobs plan as soon as possible. If they don't, I'm going to fight for it every single day between now and Election Day. My jobs plan will include exempting the first $20K of income from payroll taxes for two years, amending the bankruptcy laws to allow distressed homeowners to declare bankruptcy on their primary residence, creating a new WPA and Civilian Conservation Corps, enlarging the Earned Income Tax Credit, providing partial unemployment benefits for people who have lost part-time jobs, creating an infrastructure bank and using today's low interest rates to hire Americans to rebuild our roads and bridges and airports and transit systems, and providing tax breaks to businesses that create net new jobs. If we restore jobs and growth, we'll reduce the long-term ratio of debt to GDP. 

Yes. Indeed, the fact that the top 1 percent now gets a larger share of total income than at any time since the late 1920s, has contributed to the mess we're in -- because it's reduced the purchasing power of the vast middle class. The rich save more than does the middle class, and what we need now isn't more saving; it's more spending and investing -- public and private. 

Yes. Credit-rating agencies should be paid by those who use them, not those who issue the securities they're supposed to be rating. The best proxy for users are institutional investors.

Prices at Wal-Mart and elsewhere in the US economy will rise to the extent we can no longer rely as much as before on cheap (and subsidized) goods from China. Those price increases may feed inflation. But I suspect before that happens, Wal-Mart and other large buyers in the US will figure out how to do more in Vietnam, Cambodia, Indonesia and other places where very cheap labor is still priced cheaply. 

We wouldn't have been subjected to the hostage crisis created by tea-party Republicans. And it's more likely Obama and Democrats could have enacted a second stimulus whose size was commensurate with the actual shortfall in aggregate demand. 

I don't think the downgrade was necessary at all. (See my previous answer.) S&P is neither standard nor poor. It's aberrant, and the real onus of its decision will disproportionately affect the middle class and the poor. 

I can't give you the argument against my approach because I don't understand it. It's based on classical (now neo-classical) assumptions about the economy that are so removed from reality they barely merit attention. It's as if Herbert Hoover's Secretary of the Treasury, Andrew Melon, had been exhumed. Our nation's leaders are either deluded into thinking the neo-Melons are correct, or ideologically driven by a desire for a smaller government (which has nothing whatever to do with the current jobs and wage crisis), or -- in many cases -- intimidated by an increasingly loud right-wing chorus that blames everything on government, and always has. 

Europe's debt crisis has nothing to do with the faux "debt crisis" in America. There, Italy, Portugal, Ireland, Spain, and Greece may not be able to pay their debts. But the U.S. has no trouble at all paying its debts -- so long as tea-party Republicans don't stop it from doing so. We're the richest nation in the world, and we print the money most of the world relies on. The US downgrade by S&P is so bizarre and unwarranted -- while much of Europe is in such serious jeopardy -- that S&P's actions here don't have much bearing there. 

Tax or print money, or both. But, again, let's be clear. The US government should be able to run very large ratios of debt/GDP for quite some time before it's necessary either to tax or print more money. The current debt/GDP ratio is about 71 percent (when I last looked). That's high, but manageable. And the sooner we restore growth -- the denominator of that equation -- the more manageable it will be. 

You're right, and my sense is Moody's and Fitch both understand their job -- to assess the safety and soundness of loans to the U.S. -- rather than to venture into U.S. politics, as S&P has done. 

We don't know yet the full impact of the S&P decision. But remember, we're dealing with individuals. S&P's sovereign debt committee is headed by John Chambers, who, along with several colleagues, have been very concerned about trends in the U.S. debt. Frankly, I think they lost sight of their real job. Maybe, after having blown it so badly before the debacle on Wall Street, they decided to become overly aggressive. Or perhaps they're doing the bidding of some of the big Wall Street banks. I simply don't know. 

Downgrading is serious. If either Fitch or Moody's joins in (and I doubt they will -- but it's possible), the negative effect will be multiplied. US credit ratings should not be like move or restaurant reviews. They should be serious attempts to assess the likelihood that a given loan will be repaid. In the case of the United States, as I've stated, the only chance we may default at some point in the future is if we go through a repeat of the fiasco the tea partiers just put us through. Anything else -- including S&P's avowed worries about how big our debt may be, by how much it should be reduced over the next ten years, how it should be reduced, and the difficulties of doing so given our politics -- is irrelevant. 

Exactly. If S&P thought it was authorized to enter the political fray, why didn't it speak up when George W. Bush cut taxes, began two foreign wars, and created his giant Medicare drug benefit? 

We now know the economy shrank much more between the end of 2007 and the start of 2009 than was thought at the time, so we needed a much larger stimulus (including fewer tax cuts, which were just used to bolster saving). Some of us argued at the time for $1.2 trillion in added spending. With the benefit of hindsight, even this was too little. States and localities have cut so much they've just about negated any boost from the federal stimulus. 

I don't buy this "we can't do anything" view. Yes, it will take time to "work down" consumer debt. But history has shown us that fiscal policy, properly directed, and work. It worked (albeit in a haphazard way -- FDR didn't really know what he was doing) in 1934, 1935, and 1936. But then it was reversed, and the nation plunged into another deep recession in 1937. It appeared to work to help mitigate the effects of post-war recessions -- so well that Richard Nixon was famously purported to declare "we're all Keynesians now" (he didn't say it exactly that way). What gave Keynesianism a bad name was the stagflation of the 1970s, and the nation's justifiable fear of inflation in the following decades. But look closely and the real problem in the 1970s had more to do with skyrocketing oil and food prices (the Arab oil embargo); and the strong recovery of the 1980s a lot to do with Reagan's military Keynesianism (cutting taxes while boosting defense spending). The real irony today is that Keynes is more relevant and important than at any time since the Depression, but his detractors have gained so much traction over the last three decades that it's hard to make the case. 

"Fairness" is in the eye of the beholder. But it does seem to me that one of our underlying problems is that such a large share of the nation's income is now going to the very top (who save far more of their income than others) that aggregate demand isn't what it would be, had our nation's productivity gains been more widely shared. So on grounds both of fairness and growth I'd opt for more and higher brackets at the top. 

Not a bad idea, although steps would have to be taken to assure that the ratings agency was shielded from politics. 

Enron and Lehman were in imminent danger of going down the tubes and not being able to pay their creditors. The United States is in no such danger economically. The only danger we won't pay our creditors is if tea-party Republicans pull another hostage crisis. 

To be perfectly candid, I think S&P has completely blown its credibility and I wouldn't worry about regaining a triple A rating from it -- for all the reasons I've stated before in this forum. 

I'd give the possibility of a double dip to be 50-50 right now. I don't buy the idea of a "new normal" of high unemployment and slow growth. That's not necessary -- and it's not sustainable socially or politically. 

The Fed may need to induce a bit more inflation in order to avoid deflation, but inflation isn't a way out of the mess we're in. Nor is a declining dollar -- which will only prompt competitive devaluations. The answer is a bunch of things I've mentioned before (exempting first $20K of income from payroll taxes for two years, recreating WPA and CCC, creating a large infrastructure bank capable of taking advantage of low Treasury rates and investing in roads, bridges, ports, airports, and public transit, loans from the fed to cash-starved states and locales, partial unemployment insurance for the millions of Americans who have lost part-time jobs, and so on). Most of these will require more federal spending in the near term. We have more than enough economic capacity to do all this -- which is precisely the point. The problem is political will. Republicans won't, and Democrats are scared to even bring it up. I haven't checked on what the President said at 1:30 pm, but I doubt he's willing to take the lead on this, sadly. 

If people have savings, I'd tell them not to panic. This isn't the time to liquidate stock holdings or put money under the mattress. If they have homes that losing value, I'd tell them to try to hold on to them. If they're worried about losing their job or declining wages, I'd advise them to try to reduce discretionary spending. All these are, I believe, rational responses by individuals and families. The problem is, what's rational for them is not necessarily good for the country as a whole. That's why we need bold steps by the federal government. 

Could be. We don't know enough yet. 

We haven't entered one, and hopefully we won't. As you probably know, the economy barely grew at all in the first quarter, and the portion of working-age Americans in the work force is lower than its been in almost 30 years. These aren't encouraging signs -- but a double dip can still be avoided. 

Completely unwarranted. I can't say about motive.

I've put forward several hypotheses during the course of this forum,but have no definite idea or proof. 

Their staggering irresponsibility does little credit to the firm or to their trustworthiness in the future. 

Yes, and well the market should. 

The federal government is no riskier now than in the past, given that the U.S. continues to be the richest nation in the world and continues to print money the rest of the world relies on. The one danger -- which S&P did not rest its decision on -- is that right-wing Republicans might try again, at the end of 2012, what they tried before, and perhaps they may succeed in preventing the debt limit from being raised. What you or I or John Chambers (of S&P) thinks about when and how and by how much to reduce the long-term budget deficit relative to the size of the national economy is simply irrelevant. By the way, I'm so glad to hear the Work of Nations had at least one practical positive effect on the world. 

Too many commentators, including the mainstream media, are ready to blame "both sides," as if the truth were halfway between right and wrong. The real threat to sane public discourse, in my view, is a deeply ideological right that's bent on shrinking government no matter what the cost. 

No. It wasn't criminal. It was just immensely stupid. 

There are two separate issues here. The first is by what authority S&P or any credit rating agency acts -- that is, what it's job really is. S&P is not and should not be in the business of telling the US how much, how, and by when it needs to reduce its debt (or its debt/GDP ratio, more accurately). Its job is to alert lenders to the chances of a default, which are as low now as they've ever been -- except for the possibility of another move by tea party Republicans to stop an increase in the debt ceiling. The second -- and entirely different -- issue is how and when our political branches bring down the debt/GDP ratio over the next ten years or so. I have ideas as I'm sure you do, and I'm as concerned about gridlock in Washington as anyone. But I also worry that the current obsession and ideological warfare about the long-term deficit and debt is a colossal distraction from the immediate (and in my view, far more important) goal of rebooting the economy, and overcoming the shortfall in aggregate demand.

I'd push vigorously for a jobs and growth plan (I've outlined what that might be earlier in this forum). I'd advise the President to fight for it, and make it the centerpiece of his 2012 campaign. I'd challenge Republicans to lay out the logic of their bizarre argument that shrinking government will generate jobs and more growth. In other words, I'd shift the public debate away from the (important although distracting right now) issue of the nation's long-term debt, toward the real crisis of jobs, wages, and growth. 

I'm afraid I can't get to the remaining questions in this forum because I have to go, but thanks for your very thoughtful queries. And best wishes to all.

We will survive this storm, as we've survived every other. 

Robert Reich

www.robertreich.org