Friday, August 12, 2011

Caution: Downgrade Ahead

The Daily Beast refers to John Bellows as a "quick thinking by a little-known Treasury functionary." They also say that he was the guy who almost saved the United States' Triple A credit rating last Friday. In a flurry of back and forth projections and analysis, Standard and Poor's let our government know that they were looking to downgrade us. That's when Mister Bellows took a look at their math and noticed a two trillion dollar mistake. Their calculations were incorrect to the tune of twelve zeroes. Standard and Poor's acknowledged its mistake, then said it was charging ahead with the ratings change anyway.
Charging ahead? Since when has any of this process involved "charging ahead?" I get the impression that it didn't really matter much what deal was struck in the United States Congress, it was the last thirty years' behavior that was being discussed outside our borders. It's hard for me not to draw a comparison to my own profession. As a teacher, I can imagine the parent-teacher conference:
"Thank you for coming in, Mister and Missus United States."
"Is there some problem with our economy?"
"Well, yes there is. It seems that your national debt is fast approaching 10,000 billion dollars, or more than sixty-five percent of your GDP."
"Your economy is borrowing more than it is making."
"You're saying this is our fault?"
"Well, yes."
"Really? And just how do you suggest we go about fixing this mess?"
"Well, you could bring in more revenues."
"And how would we do that?"
"You could raise taxes."
"I'm sorry, did you say 'raise taxes'?"
"It's probably the easiest ways to -"
"No economy of mine is going to have to raise taxes. We're better than that."
"I'm aware of your history as world leaders, but I do think it's time to consider other options."
"Okay. What's the worst that could happen if we don't do anything?"
"You could have your national rating lowered."
"To what?"
"To double A plus."
"Double A plus? That doesn't sound too bad, does it honey?"
"But this could effect future earnings and current debt."
"Double A plus. That sounds great."
"Yes, but other nations depend on us to have a strong economy. It's not just us."
"I think I'll get a bumper sticker for the Escalade that says 'Our Credit Was Rated By Standard and Poor's At Double A Plus!"
"I'm not sure you're getting the big picture."
"Thank you for taking time out of your busy day."
"But Mister and Missus America, you might have to give up some of the things you value most."
"Right now?"
"Well, no, but in the years to come -"
"Well then, let's go out and celebrate our new rating!"
"Thank you for coming in. If you see that Bellows kid in the hall as you go out, could you send him in?"

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