S&P finally notices the dysfunction in D.C., but what about its own?
Standard & Poor’s report highlights dysfunction in its own realm
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.