Standard & Poor’s, the credit rating company, did nothing on Monday to suggest that it would actually lower the United States’ sterling triple AAA credit rating. But its decision to jump into the political dogfight over debt reduction by giving a negative assessment of Washington’s prospects for lowering the national debt by 2013 seems unusually strange.
It may have been intended to prompt a more conciliatory, bipartisan approach in Washington to debt reduction. Or it may have been intended to give fodder to Republican budget cutters for ideological reasons. Or it may have been the company’s way of redeeming itself for past myopia on market and investment trends. It’s hard to say.
But this much is clear. By lowering its assessment of the outlook for debt reduction in Washington by 2013 to negative from stable, it did nothing constructive to help the economy.
Rather, the main effect of its negative outlook report was to create some transient jitters in the markets, to put further downward pressure on the value of the dollar, to stir some anxiety among investors and Americans otherwise worried about their jobs, and, possibly, to add to the debt it bemoans by raising Treasury’s cost to sell federal bonds to meet interest expenses on the national debt for a while.
Otherwise, it was sort of a non-event by a credit rating agency that blew its rating credibility over the last decade by issuing high marks for a range of high-flying companies that subsequently crashed – from Enron to some of the biggest investment banks on Wall Street. Indeed, S.&P., and its credit ratings cohorts, endorsed Wall Street’s portfolios of toxic mortgages all the way from 2000 to 2008. It was at least blind, if not a deliberately helpful player, in the bubble economy from 2000 right up to its 2008 crash into the gulf of the Great Recession, which Washington (and the global economy) only survived through the Federal Reserve’s willingness to open a range of credit windows to break the free-fall and begin to repair the damage.