Economic Woes and Political Blows

The markets are bracing for impact this weekend after the S&P downgraded the nation's credit rating from AAA to AA-plus.  This marks the first downgrade in America's credit rating since 1917, a stat that the GOP presidential candidates have jumped on to bash Obama's presidency.
So is Obama to blame for the current economic crisis?  According to John Mariotti, yes.  But I think there are more people to blame than just the Commander in Chief.
In the past half century, the power of the presidency has taken center stage in federal economic policy - from LBJ's Great Society, to Reaganomics, to Bush and Obama stimulus - so the presidency is partially responsible for the ecomonic trends we have encountered.  But necessary for all these economic plans is the complacency of Congress.
Thus we arrive at my point that Congress is to blame for our economic woes as much as Obama is.
It is the constitutional authority of Congress to set the nation's budget.  Just because presidents have dabbled in the process does not mean Congress is excused from that responsibility.  And I must admit, this last debacle was quite revealing of how our lawmakers in Washington operate.
We have seen in the last couple of weeks that Congressmen are so driven to have political power that they will not deal with dissenting factions, leading to gridlock and public unrest.
Don't misunderstand me, I think that this is how politics should work, and it should be difficult for lawmakers to pass sweeping bills that cover taxes, spending, and entitlement programs.  The issue arises then, when we find ourselves in situations where immediate and drastic action is needed.  Too much political banter slows down action and forces either failure (default) or poor solutions (the compromise that was hastily made).
So what could happen that would make our political and economic systems better?  Easy solution: end the plethura of programs and fiscal responsibilities our federal government has.
Allow me to make an anecdote.
A family of five is living the good life.  They live in a 4 bedroom home in a suburban community, a dog in their fenced backyard, a sedan and SUV in the driveway.  Father works at a successful law firm and Mother works part-time as a teacher's assistant at the local middle school.  They are making payments on their house and cars, but are able to stay on top of their budget.  Suddenly, Father has lost his job and the money flow has slowed to a small trickle.  What would be the best actions to take?
If he were a Keynesian, like our lawmakers in Washington, he would spend money on a newer, more expensive car, a new wardrobe, perhaps even a $300 haircut so as to appeal to employers as he searches for a new job.  After all, you have to spend money to make money.
6 months later, Father has defaulted on his credit payments, lost his home, his car, and his dog (he had to sell it to pay for a monthly payment - poor Fido).  Clearly, spending money to jumpstart his career did not work.
But let's backtrack 6 months and allow Father to take a different route.
This time around Father decides he should save what money he can and look for any job willing to hire.  He sells his BMW and buys a used Corolla, he refinances his home to make smaller payments over a longer period of time, he even gets  rid of his ultra-deluxe cable package and Netflix account.  He gets hired on as an assistant at another law firm and makes 80% of what he used to, but because he is frugal with his money, he and his family are staying out of credit problems and are able to live in relative economic safety.
Ok, my anecdote done here's my point: when faced with economic instabiliy and credit failure, the response should not be for the government to print more money and throw it into the marketplace in an attempt to jumpstart the ecomonic engines.  The government needs to set the example by cutting their spending and finding appropriate areas to tax (perhaps the Fair Tax) so as to run a balanced budget.
Consider this a battle between Keynesian and Austrian economic theories.  If you want a simple explanation of what these two positions are, check out this rap.
So what are some of the repurcussions of this great Keynesian experiment?
S&P has already downgraded our credit once, we may need to plan on having it happen again in the near future.  The budget deal is only a temporary patch that really accomplishes little.  Yes, $940 billion will be cut, but it's over the next 10 years and those are just cuts on projected spending hikes, which basically means we're not lowering our budget spending.  In the long term, if we don't stop real spending in Washington by cutting out or reducing multiple programs, America will eventually default and then really bad times are in store for us.
Looking into foreign markets, there is a good chance that if America does not get her financial house in order, the dollar will lose its hegemony over global trading.  Already China is looking to dethrone the fiat currency that has been in power since the 1960's.
So let's take a step back and look at the whole picture.  It doesn't look pretty.  America needs to run a balanced budget and reduce our debt, not allow for us to go into more debt.  We need to "tighten our belts" and take the necessary steps, unpleaseant thought they may be, to fix our spending problem.
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