1. The Republican Party made a big, big mistake passing up a chance for a “grand bargain” with Obama. It’s time to be a realist about revenue increases, rather than signaling ideological purity. And let’s get a better rather than a worse version of revenue increases, combined of course with significant spending cuts and a good, credible long-term fiscal plan, enforced by tough triggers. A lot of Republican or conservative intellectuals know better on revenue increases, and have said as such, but corruption, intellectual and otherwise, prevented their voices from being heeded in the larger political context.

2. Democrats need to choose on entitlements. Ross Douthat nails it. It’s time for Obama to lead.

3. I don’t expect anyone to change their mind at this point, but the “we should have had a much bigger stimulus” argument is unlikely to go down in intellectual history as the correct view. Instead, Ken Rogoff and Scott Sumner are likely to go down as the prophets of our times. We needed a big dose of inflation, promptly, right after the downturn. Repeat and rinse as necessary. But voters hate inflation and, collectively, we proved to be cowards. Too bad.

4. As a simple rule of thumb, if at this point, in response to this news, a commentator attacks the ratings agencies for their previous mistakes and stupid, corrupt behavior, it’s a sign the commentator is trying to muddy the broader issues at stake. Such commentators may well be correct in their criticisms, but probably they are not facing up to their recent mistakes and seeking to shift the blame. Watch out for this.

5. I’m not sure how markets will respond, and I don’t think that an alarmist reaction about the market would be appropriate. A letter grade is a letter grade and the facts on the ground did not change today. It may or may not lead to a major sell-off. Still, years from now today may well be seen as a turning point of significance.

6. If this really does happen, let’s hope it serves as the needed wake-up call. If it doesn’t, well, back to…