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Akron
Beacon Journal...
Downgrade
nation
August 8, 2011
Standard
& Poor’s long warned that
it would downgrade the country’s credit rating if the White House and
Congress
did not deliver a substantial package for reducing federal deficits
during the
next decade. The rating agency talked favorably about a package in the
vicinity
of $4 trillion. In the end, Washington agreed to roughly $2 trillion as
part of
increasing the debt ceiling.
Thus,
on Friday, Standard & Poor’s
stuck to its word, lowering the rating — for the first time ever — from
the
sterling AAA to AA+. In a way, then, the move shouldn’t have come as a
surprise. What is dismaying is how the rating agency has handled the
situation,
even in light of its earlier warnings.
In
this climate of heightened anxiety,
Europe facing a severe debt crisis, the American economy stagnating, 25
million
Americans wanting yet unable to find full-time work, a rating agency
must take
the utmost care in such an announcement. It must be concerned about
adding
undue worry, about triggering an excessive reaction.
In
making the downgrade, Standard
& Poor’s highlighted the dysfunctional political realm,
Democrats and
Republicans unable to bridge their differences. That largely is because
Republicans
refuse to face the reality of needed tax increases to help deal with
the
deficit. Yet the picture is much broader. The country’s financial
condition
hardly differs from that of other nations with a triple A rating. More,
in this
difficult period, investors have been leaping to the safety of Treasury
bonds.
In
addition, Standard & Poor’s has
its own credibility problem. How rich to receive a lecture in financial
management from one of the leading culprits in the Wall Street
calamity, and
the recession that has contributed heavily to the big deficit. The
rating
agencies long attached AAA ratings on highly questionable mortgage
bonds, all
the while reaping handsome fees from the flow of business.
The
question is fair: Is Standard
& Poor’s now seeking to show its independence? Neither Moody’s
nor Fitch,
the other rating agencies, has opted for a downgrade. The U.S. Treasury
noted
that Standard & Poor’s didn’t include in its calculations the
$2 trillion
in savings from the debt-ceiling deal, inadequate, yes, but still a
beginning.
Yet
for all the questions and doubts
about the timing of the announcement, Standard & Poor’s has
stated the
truth. This country faces a huge debt problem ahead, and Washington
appears at
a loss about how to govern. The debt-ceiling agreement places
responsibility on
a bipartisan panel of lawmakers to find an additional $1.5 trillion in
savings.
John Boehner, the House speaker, has said he won’t tap a Republican who
may
include tax increases as a part of a final proposal.
In
other words, if governing requires
compromise, as it does in a divided government, then Boehner and
company aren’t
interested in governing. It is easy to share the frustration of
Standard &
Poor’s. This moment requires thoughtful management, taking immediate
steps to
spur a lagging economy and also setting in motion deficit reduction
when the
economy gains strength. That calls for balance and practicality, for
putting
the country’s interests ahead of partisan agendas.
Read
it at the Akron Beacon Journal
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