S&P fi­nally no­tices the dys­func­tion in D.C., but what about its own?

Stan­dard & Poor’s re­port high­lights dys­func­tion in its own realm

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N otes on the news:

■ It’s hard to sup­press laugh­ter when read­ing Stan­dard & Poor’s cri­tique of the U.S. long-term debt. Af­ter first mak­ing a $2 tril­lion arith­metic er­ror in its anal­y­sis, as U.S. Trea­sury of­fi­cials pointed out, it down­sized the math­e­mat­i­cal por­tion of the re­port to fo­cus on the coun­try’s pol­i­tics.

“The po­lit­i­cal brinks­man­ship of re­cent months high­lights what we see as Amer­ica’s gov­er­nance and pol­i­cy­mak­ing be­com­ing less sta­ble, less ef­fec­tive and less pre­dictable than what we pre­vi­ously be­lieved,” S&P stated.

Re­ally? This sounds like the sud­den dis­cov­ery of some­one who showed up late for class. Like Capt. Re­nault in “Casablanca,” S&P is shocked, shocked to find pol­i­tics go­ing on here! Had the credit-rat­ing agency been pay­ing at­ten­tion dur­ing the health­care re­form de­bate, it would have known for more than a year that the body politic was se­ri­ously ill.

Let’s fill in S&P on what has hap­pened so far: The Congress de­bates health­care re­form for months. Each time the Democrats pro­pose a plan that might be ac­cept­able to op­po­nents, Repub­li­cans move the goal posts. Mean­while, the nation wit­nesses a Sum­mer of Crazy fu­eled by funds from well-heeled po­lit­i­cal groups in which peo­ple dress up in Colo­nial garb and de­nounce “tyranny” while oth­ers rail against “death pan­els” and gov­ern­ment takeovers and com­pare the pres­i­dent of the United States to Nazis and/or Com­mu­nists. In­cred­i­bly, these rav­ings are par­roted by politi­cians pre­vi­ously re­garded as semi-re­spon­si­ble adults.

Af­ter re­form pro­po­nents shed the pub­lic op­tion and any­thing else deemed even vaguely “so­cial­ist,” we get down to a mar­ket-based plan es­sen­tially the same as those floated by the Her­itage Foun­da­tion and con­ser­va­tives in the early 1990s. Repub­li­cans could take credit for mov­ing a Demo­cratic pres­i­dent and Congress to their way of think­ing, but in­stead they con­tinue to fight the new law, vow­ing to re­peal and re­place what they pre­vi­ously ad­vo­cated.

This spec­ta­cle is fol­lowed by ve­he­ment op­po­si­tion to the con­fir­ma­tion of Dr. Don­ald Ber­wick, a noted pa­tient-safety ad­vo­cate, as CMS chief be­cause that per­son would have to ex­e­cute the law. Dys­func­tional gov­er­nance? Who could have known? ■ If there’s any group that should know about dys­func­tion, it’s the credit-rat­ing agen­cies. Un­til S&P’s Fri­day bomb, which helped roil the mar­kets, the agen­cies had been fa­mous mostly for their role in be­stow­ing in­vest­ment-grade rat­ings on ra­dioac­tive sub­prime mort­gage-backed se­cu­ri­ties. That ac­tiv­ity, not co­in­ci­den­tally, raked in mil­lions in prof­its for the agen­cies. The fi­nan­cial cri­sis in­ves­ti­gat­ing com­mis­sion la­beled them “key en­ablers of the fi­nan­cial melt­down.”

Then there’s the long string of cor­po­rate de­ba­cles of the past 20 years—some in the health­care realm—that the agen­cies didn’t see un­til in­vestors lost a bun­dle.

Bill Gross, the founder of Pa­cific In­vest­ment Man­age­ment Co., once urged in­vestors to ig­nore the agen­cies, brand­ing them “an id­iot sa­vant with a full com­mand of the math­e­mat­ics, but no idea of how to ap­ply them.” Af­ter the $2 tril­lion er­ror, the first part of that state­ment is ques­tion­able. ■ Nev­er­the­less, S&P may have ac­com­plished some­thing its as­sess­ment sug­gested was im­pos­si­ble: It brought Democrats and Repub­li­cans to­gether. The Wall Street Jour­nal re­ported that lawmakers of both par­ties were con­sid­er­ing in­ves­ti­ga­tions of the rat­ing agen­cies and re­stric­tions on their in­flu­ence. The agen­cies were al­ready in the cross hairs in the Dodd-Frank fi­nan­cial over­haul. Now, some mem­bers of both par­ties are say­ing the rat­ings oli­gop­oly needs re­form.

Who says bi­par­ti­san­ship is dead? Maybe we can re­visit health re­form.

NEIL MCLAUGH­LIN Man­ag­ing Edi­tor

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