Wednesday, August 10, 2011

August 10, 2011--Poor Standard & Poor's

Yes, everyone's right, from the talking heads to the president of the United States--Standard & Poor's used dubious economic data when they downgraded the United State's credit rating.

Treasury Secretary Tim Geithner pointed out that S&P forgot to include $2.0 trillion of U.S. assets when doing their sovereign-debt arithmetic. It was a mistake so obvious that even an Accounting 101 student would have been able to pick it up. Yes, yes.

President Obama noting this as well, sternly pointed out that their decision for the first time in history took away our triple-A rating and ranked us with Italy of all countries and lower than France (France?) for political and not economic reasons. They pointed to our government's inability to govern. As if that has anything to do with our capacity to pay our bills.

New York Times op-ed columnist Paul Krugman, not much of an Obama fan, expressed outrage that this rating agency, funded in its corporate work by the very firms it rates, casually strewed triple-A ratings on the financial instruments banks and financial institutions peddled that brought us to the breaking point. Lehman Brothers, the day before it went under, was still getting S&P A-ratings when any accrediting agency worth its salt would have, should have known about the hanky-panky rampant there and in the rest of the financial industry.

So, yes, they got it wrong again this time, dreadfully wrong and the markets went into gyrations.

But, in one essential way they got it right.

And, if we could only calm down and stop scapegoating S&P, while not exonerating them for all their shabby and probably felonious work, we should pull up our socks and thank them.

Someone, anyone, even a compromised Standard & Poor's has to tell us we're in a big-time economic crisis and force us to get our economy in order. It's a mess and will be a very messy process because of extreme partisanship in Washington and because greed continues to hold much of corporate America and the wealthy in self-absorbed thrall.

The Chinese said we're "addicted to debt," and they should know because they are our most reliable pusher. But we could wink at that and ignore them since they own so much of our paper and would bring down on their heads their own economy if they were to call it in.

But the shock to the system provided by Standard & Poor's, corrupt as they are, is not so dismissible. People who invest money still pay attention to them. And, more than anything else in America, money talks. Case in point the erratic behavior of the world's stock markets during the past few days.

If Barack Obama were a leader, rather than a rhetorician and perpetual campaigner, he would see this as an opportunity and do more than scold S&P and House Republicans. He would call Congress back from its undeserved vacation and have the four senior congressional leaders--two from each party--literally move into the White House, lay his own plan before them (not, as he has done for nearly three years, react to other's initiatives), and push them to come up with a real "grand bargain" that focuses on job creation and deficit reduction that is as much about generating additional revenue as it is about cutting expenditures.

I would keep them talking 24 hours a day until they came up with something fair and meaningful. This is admittedly an unlikely prospect--most of the GOP doesn't want just to defeat Obama, they want to destroy him. But then he would have something to campaign about. Not just more of his now too-familiar cliches. He'd actually have a program to run on, not only promises and hope. Of those, he has run out.

The only way to restore them--both essential to national well-being--is through real leadership and specific policies that he puts forward and fights for. Even at the expense of becoming a one-term president. This is a likely outcome anyway (unless the Republicans nominate one of their "crazies") so he might as well go down fighting. Ironically, if he went down fighting, with an emphasis on the fighting, like Harry Truman in 1948, that probably would assure his reelection.

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