The sky is falling, the sky is falling... perhaps...

The news that Standard & Poor's has downgraded the United States long-term credit rating should come as no great surprise to those of us who have observed the slow-motion car crash that is Capitol Hill over recent years. The creation of two 'great' parties, each of whom have a base of support with nowhere else to go, scrabbling to garner the centre ground by painting the other as extremist and dangerous, combined with a political architecture that protects the minority at the expense of the majority and has almost as many checks and balances as the Federal Constitution of the Liberal Democrats, has led to a poisoning of the American body politic.

And it is this poisoning which is at the core of the downgrading. As Standard & Poor's report says;

"The political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy. Despite this year's wide-ranging debate, in our view, the differences between political parties have proven to be extraordinarily difficult to bridge, and, as we see it, the resulting agreement fell well short of the comprehensive fiscal consolidation program that some proponents had envisaged until quite recently. Republicans and Democrats have only been able to agree to relatively modest savings on discretionary spending while delegating to the Select Committee decisions on more comprehensive measures."

The fact that an organisation can describe American government as less stable, less effective and less predictable is not particularly surprising. After all, it is true. How many other developed countries would bicker and squabble over such a fundamental issue as the ability of the state to finance itself? You might expect that of a sub-Saharan borderline failed state, but the United States, the cornerstone of the world's financial and trading architecture?

With the tax and spend wing of the Democrats on one side, and the 'never knowingly use a fact when a slogan will do' Tea Party on the other, and the moderates on the Republican side held hostages by a bunch of small/no government zealots, there is no ability to form a consensus, let alone one that can achieve 60% of the votes and overcome the legislative hurdles that exist.

It is interesting that the Chinese should now get involved in the debate, angrily denouncing the Americans for their dependence on debt. After all, owning someone's debt gives you power over them, a fact that has gone unnoticed by many Americans as more and more of their sovereign debt ends up in the hands of people who have little interest in democracy, freedom and the American way. Indeed, nearly 30% of American debt held overseas in held by China and Hong Kong, some $1.3 trillion as at December 2010, 10 % of the overall debt level.

It makes the position of the Coalition government look, in relative terms, rather reassuring. There is no suggestion that our long-term credit rating is under threat, and we remain one of the shrinking number of nations with a AAA rating - a point that Vince Cable was quick to emphasise today, linking it as he did to the fact that we are part of the Coalition.

Time for Vince's Plan A+, methinks...