UPDATED TO TRY TO SUCK LESS.
FIRST DRAFT WAS AN ANGRY RANT. THE KOS COMMUNITY DESERVES BETTER (not that this edit necessarily gets there). SORRY.
The failure in worldwide economic demand is not addressed by shrinking US government spending.
The S&P downgrade did include discussion of the decline in US political stability. The US is not Namibia, or Iraq, but a president who gives in to Tea Party hostage takers on the debt limit does not inspire confidence that there are predictable outcomes on future debt related issues.
More important, to the extent that the market is discounting future performance of the world economy, it is signalling expectation of recession. Last week's bill to spend less, and implied political imperative to keep spending less, indicates that spending by the US is not going to be an engine of demand to break the economic vicious circle downward.
US is not the only political entity to reject Keynesian approach, but its austerity approach is a huge negative regarding aggregate demand.
Obama is not repeating FDR in 1937, he is repeating Hoover in 1930. The decline in tax revenues post-1929 crash was greeted by a cut in government expenditures.
The stimulus broke the immediate and potentially catastrophic economic decline in 2009. But, as a lot of lefties noted--it was too small.
FDR had the "benefit" politically, of being able to come in after Hoover had failed dramatically, and FDR had political support to implement the New Deal.
Obama does not get the benefit of that political dynamic. He didn't solve the problem, just treated it, and now he is not leading the economic discussion in a productive direction.
(Resuming original pissed off text)
The dialog on the economy is led by a political class that is clueless, reported by a media class that is stone cold stupid.
Dems need to primary Obama with Krugman