Don’t Shoot the Downgrade Messenger
Attacking S&P for the U.S. credit downgrade is like criticizing your doctor for diagnosing your cancer.
August 9, 2011 - 11:57 am
When companies like AT&T and Caterpillar reported that the ObamaCare law would cost them hundreds of millions of dollars, Commerce Secretary Gary Locke called them “irresponsible.” Congressman Henry Waxman (D-CA) threatened to haul the CEOs into hearings to defend their statements. (Waxman later cancelled those hearings when it was pointed to him that the companies were required by law to report to the SEC their best estimates of ObamaCare’s effect on their financial bottom lines.)
It could be worse for S&P. Some liberals want to do more than merely launch a congressional investigation. Leftist filmmaker Michael Moore recently urged President Obama to “show some guts & arrest the CEO of Standard & Poors.”
It is true that S&P (as well as the other two major credit rating agencies Moody’s and Fitch) can be rightly criticized for failing to downgrade various risky mortgage-backed securities a few years ago — thus contributing to the disastrous housing bubble. But note that critics of S&P are now trying to have it both ways. They’re criticizing S&P for downgrading the federal government too quickly, rather than too slowly.
The threat of government action might stop Fitch and Moody’s from following suit with their own downgrades — at least for now. Moody’s has already reaffirmed its current AAA rating, whereas Fitch stated they are still performing their review and “haven’t formally reaffirmed“ their AAA rating.
Our government can attempt to “shoot the messenger” all it wants. But its current policy of spending more money than it has will eventually catch up with us all. The only question is when. The Chinese government — which can’t be intimidated by threats from Congress or Michael Moore — has called the downgrade an “overdue bill.”
Ayn Rand once said that we could evade reality, but we couldn’t evade the consequences of evading reality. Unless we change our ways, America will soon learn what those consequences will be.