U.S. stocks fell deep into the red on Monday as investors coped with the news that the United States had lost its “AAA” credit rating.
All three major U.S. stock indexes were down pushing the Dow below 11,000 for the first time since November.
The stock market has now lost 14% during the past two weeks.
“Investors are having one reaction to the downgrade: sell first and ask questions later,” said Paul Zemsky, head of asset allocation with ING Investment Management.
The Dow Jones industrial average (INDU) sank 634 points; the S&P 500 (SPX) lost 79 points; and the Nasdaq Composite (COMP) had dropped 174 points.
During the Debt Ceiling negotiations, economists urged lawmakers to come to a compromise to avoid just such a reaction from the stock markets. However, several conservative and Tea Party pundits and supporters made clear they thought a downgrade would be a good thing.
Fox News’ vice president of business news Neil Cavuto recently said during an interview with John Stossel “I would welcome a downgrade. I really would.”
ThinkProgress spoke with Rep. Mick Mulvaney (R-SC) to get his further thoughts about a possible default. Mulvaney said that a default would actually be preferable because raising the debt ceiling without addressing the “underlying fundamentals” would make “things worse.” Mulvaney argued that just increasing the debt ceiling would cause more harm than a default. “If we do a clean debt ceiling, that could be the worst thing we can do,” he said:
ThinkProgress: In terms of the debt ceiling, there’s a lot of talk about possibly defaulting in a couple weeks, but obviously Republicans are worried about long-term fiscal health in terms of the effects of raising revenue. Which do you think would end up being worse for the country, if we were to go through a short-term default or if we were to have long-term revenue increases?
MULVANEY: I think the worst thing for the country is to not fix what got us here in the first place. That’s why you see us fighting so hard on this issue, to not have a clean debt ceiling. I think ratings agencies told me the same thing. If we simply raise the debt ceiling but don’t address the underlying fundamentals, then we’re making things worse.
ThinkProgress: So that might end up being even worse than a default?
MULVANEY: I think so. If we do a clean debt ceiling, that could be the worst thing we can do.
Mulvaney is not the only member of the Republican caucus downplaying the consequences of a default. Rep. Devin Nunes (R-CA) called for the nation to default on our debt obligations because “it could benefit us to go through a period of crisis.”
Rep. Ron Paul (R-TX) agreed that default could be a “positive thing” because it will show we’re “serious.” Even House Budget Chairman Paul Ryan (R-WI), considered by many in Washington to be the “serious” conservative economic voice, advocated a short-term default.
So as you watch your retirement accounts and life savings take another hit, remember the message from these folks: this is for our own good.