One of the more depressing and outrageous revelations of the massive
Wall Street scandal was the news that the previously Olympian ratings
agencies, Moody’s and Standard & Poor’s, were incompetent at best; at
worst, they were in bed with the investment banks whose bonds they were
supposed to be evaluating. Both agencies, for example, bestowed AAA
ratings — the highest possible — on laughably flimsy
mortgage-backed bond contraptions, whose demise almost sank the global
economy. In an actual market, no one would trust these fools to rate
anything anymore; new, untainted agencies would be born to replace them.
But on Wall Street, no one ever has to say they’re sorry.
So it was rich to watch Standard & Poor’s venturing ever so boldly into
the world of politics, issuing a warning about the future solvency of
the U.S. government if a long-term deficit-reduction deal isn’t
achieved. S&P was once again reflecting the views of its corporate
clients, who are worried about the looming debt-ceiling fight but also
don’t like President Obama’s financial reforms or his recently restated
desire to return tax rates for the wealthy to the fearfully modest
levels established by Bill Clinton in the 1990s. Stocks dipped on the
S&P warning, but the bond market was unmoved, and so was the Obama
Administration. The timing of the warning was both curious and ironic: despite all the
usual political bleating, we seem to have finally stumbled upon a real
discussion of our long-term deficit problems. Actual proposals are being
made; actual negotiations are taking place. We have Congressman Paul
Ryan to thank for this. His proposed deficit solution, as ridiculously
unbalanced and unfair as it was, was the first official Republican
acknowledgment in a long time that merely cutting “wasteful”
discretionary spending won’t be enough to influence the long-term
deficit, and that the problem isn’t just Obama-related. “Ryan put
previously untouchable things like entitlements and farm subsidies on
the table,” an Administration official told me, “which was a real public
service.”
