Get the job done and get out
Inside View by the Editor
- September 1, 2011
What this country needs is more politicians like Virginia’s Sen. Jim Webb.
I don’t mean more Republicans turned Democrats or novelists who become politicians. We need people in Congress who, like Webb, have no intention of running for re-election.
The country should elect people who pledge to get things done and then get out. That is the only way to keep members of Congress from calculating how every vote will help them achieve their overarching goal, perpetual re-election.
The truth is that our political system, like our health-care system, is broken. That is the ultimate message of Standard & Poor’s decision to downgrade U.S. bonds from their AAA rating.
S&P was alarmed by the prospect of the U.S. defaulting on its debt, but the ratings agency was absolutely appalled by the protracted deliberations in Congress over the debt ceiling. Food fights in middle-school lunchrooms show more dignity.
Politicians pouted, pointed fingers, called names and walked out of negotiating sessions in a huff. They used the crisis to score points on the opposition and preen in the spotlight. It didn’t seem to matter that the nation was edging toward financial catastrophe.
While Congress dithered, the public’s anxiety rose with the summer heat, which climbed into triple digits on many days. Someone should have shooed the politicians out of the Capitol and into the parking lot. That would have sped up negotiations.
At the end of the debacle, the public’s approval of Congress had dropped to 14 percent, and only 17 percent of voters were inclined to re-elect their congressmen in 2012, according to recent polls. Those numbers probably would have been even lower if not for Rep. Gabrielle (Gabby) Giffords of Arizona. Giffords, who was recovering from a gunshot wound to her head, flew to Washington to cast her vote for the deal because she feared the nation was in financial peril.
In the opinion of S&P and many observers, the last-minute deal that Congress approved doesn’t do enough to address structural issues fueling America’s soaring debt. A 12-member super-committee created by the bill is supposed to follow up with more reforms by November. But the panel will be evenly divided between Republicans — who have drawn a line in the sand on taxes — and Democrats who have vowed to protect entitlement programs like Social Security.
The language in the S&P report is damning. The downgrade “reflects our view that the effectiveness, stability and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating” back in April, the report says.
“Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement … into a broader fiscal consolidation plan that stabilizes the government’s debt dynamics any time soon.”
In fact, S&P is so pessimistic it says it may lower the bond rating another notch, to AA, within the next two years.
You can almost see the report’s authors throwing up their hands in disgust. Read between the lines, and the message comes through: “These guys are hopeless.”
On the Monday after the S&P downgrade, the Dow Jones industrial average fell nearly 635 points. Much of the money pulled out of stocks ironically was poured into U.S Treasury bonds. So if investors still had faith in downgraded bonds, why were they in such a rush to sell stocks? The answer is they had lost faith in the government’s ability to keep the economy out the recession and solve the debt crisis.
S&P, of course, has taken a lot of heat for its decision. The White House says the S&P’s figures are faulty. Other critics question the wisdom of using political analysis to determine bonds ratings. Many people also pointed out that during the housing bubble all three major rating agencies — S&P, Moody’s and Fitch — gave AAA ratings to mortgage-backed securities that turned out to be worthless. There is even talk of finding a new system to rate bonds that avoid the big three agencies entirely.
The ultimate insult appeared to come Aug. 9, the day after the 635-point selloff. A plane towing a banner flew over S&P’s offices in Manhattan. The banner read, “Thanks for the downgrade. You should all be fired.”
S&P, however, was not the first choice for that airmail letter. The person who hired the plane, Lucy Nobbe, an investment banker and single mother of two from Kirkwood, Mo., wanted it to fly over Washington, D.C. That wasn’t possible because of the capital’s no-fly zone.
In other words, Congress still hasn’t gotten the message.