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Credibility Gap

2011 April 19

          I’m no economics expert, but it doesn’t require more than a merely glancing awareness of rating agencies — and their role in the economic meltdown of late 2008 — to be skeptical of Standard & Poor’s recent downgrade of United States debt obligations. The agency bestowed its top-tier AAA seal of approval on every toxic subprime security that led directly to the nation’s economic near-collapse — and now it’s squeamish about good old Uncle Sam savings bonds?      

          Excuse me if I chose to ignore Standard & Poor’s recently adjusted outlook — from stable to negative — for U.S. debt. Yet the stock market didn’t ignore it. All major exchanges opened much lower the morning of the announcement — though much of the retreat was quickly erased by more positive trading news over the next several days. Standard & Poor’s message, though, was not so much economic as it was political: the dangers lie not in the U.S.’s relative ability to make good on its obligation but in our political class’ inability to find a generally viable way forward — in both the short term and the long run. And on that score our elected officials are continuing to send us an unambiguous message: we are as far apart as ever — on both the current budget and the prospects for raising the longer term debt ceiling — and we have no desire to strike any kind of deal with the wrong-headed other side.

          It may not require an economics professor to confirm the looming impasse, but it doesn’t hurt: And we certainly need not rely on the advice of Standard & Poor’s.

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