To understand the furor over the decision by Standard & Poor’s, the rating agency, to downgrade U.S. government debt, you have to hold in your mind two seemingly (but not actually) contradictory ideas. The first is that America is indeed no longer the stable, reliable country it once was. The second is that S.& P. itself has even lower credibility; it’s the last place anyone should turn for judgments about our nation’s prospects.
Fred R. Conrad/The New York Times
Anger Over Credit Rating Resurfaces in Washington (August 7, 2011)
Amid Criticism on Downgrade of U.S., S.&P. Fires Back (August 7, 2011)
Times Topics: United States Economy | Standard & Poor’s
“Just because the guy who tells you the house is on fire is an arsonist doesn’t mean the house isn’t on fire.”
Joe Bute, Pittsburgh
Let’s start with S.& P.’s lack of credibility. If there’s a single word that best describes the rating agency’s decision to downgrade America, it’s chutzpah — traditionally defined by the example of the young man who kills his parents, then pleads for mercy because he’s an orphan.
America’s large budget deficit is, after all, primarily the result of the economic slump that followed the 2008 financial crisis. And S.& P., along with its sister rating agencies, played a major role in causing that crisis, by giving AAA ratings to mortgage-backed assets that have since turned into toxic waste.