Anthony Newley and Leslie Bricusse wrote a song in the 1960s that became one of the evergreen favorites that live on in the world of performing musicians. Its opening lines are:
Just once in a lifetime
There’s one special moment
One wonderful moment
When fate takes you
Standard and Poor’s had its moment recently when it downgraded U.S. Treasury securities. Fate took its hand and delivered a once-in-a-lifetime opportunity to “do great things” as the song lyric later promises.
In that single moment it could have reclaimed its credibility as
a company, erased its past mistakes and omissions, and forced a profound change in the way our country’s finances are managed.
Instead, like an infielder booting a ground ball, it made history’s version of ESPN’s “Not the Top Ten” lowlights.
The ratings downgrading prompted a response from the White House, which launched an attack on Standard & Poor’s credibility. The ratings company is very vulnerable in that area, having missed both Enron’s precarious grip on financial reality and Wall Street’s feeble grip on reality of any sort.
Later, using a phrase coined in a political war room somewhere, others tried to marginalize, and politicize, the S&P downgrade by calling it a Tea Party downgrade but the term failed to gain traction.
The underlying reason why it failed was the first half of the setup for S&P’s moment. And it was quickly followed by the other half.
The Treasury Department discovered that Standard and Poor’s had made an error in its math, an error that, when extended to the full trajectory of the forecast which goes out to 2025, amounted to $2 trillion. This allowed Treasury and the administration to mock the ratings company and to categorize the downgrade as the product of flawed research and a flawed company.
Treasury’s announcement of the error gave everybody an “aha” moment but little else. It did not affect the underlying reason why all the name-calling and besmirching of S&P wasn’t enough to offset the downgrade, either in public opinion or in financial markets around the world. The reason was that in our hearts we knew that Standard and Poor’s was right. Our federal government’s finances are all messed up. We knew that as a company Standard and Poor’s was more than a little messed up itself but that didn’t make it wrong.
Now the setup was complete. The Treasury Department’s announcement of S&P’s arithmetic error required a reply, and the world media and financial markets were gathered to hear it. Fate was standing on the stage with its hand extended for Standard and Poor’s to grasp and do great things.
Standard and Poor’s could have used the opportunity to say that the downgrade wasn’t about the math, it was about the lack of recognition, let alone acknowledgement, that there was a problem. It was about the absence of even a plan to do something about deficits that march on through the foreseeable future. It was about fake spending cuts, over 10 years, that may never materialize, just as they never have in the past. It was about a borrowing limit deal that did nothing except create a super-committee whose proposed budget cuts would still have to be approved by the same Congress that couldn’t agree before.
But, of course, that didn’t happen. Instead, Standard and Poor’s attempted to explain that the math error, which it admitted, wasn’t really so bad since the Congressional Budget Office’s projection itself probably had an accuracy of plus or minus $10 trillion by 2025, etc., etc.
The response was technically correct and responsive to Treasury’s point, but it left most readers with, “Blah, blah, blah.” It failed to change either public opinion or the political dialogue. It didn’t change anything.
Standard and Poor’s moment is gone. The company will live on, endure the assaults on its reputation, and maybe even enjoy some success. But there will never be another moment like that for the company. Fate has left the building.
We watch videos of athletes’ errors and missed opportunities with mixed emotions. It isn’t as much fun as we might think at first, especially if it involves flubbing a once-in-a-lifetime opportunity.
It was no fun at all watching Standard and Poor’s moment come and go. It hurt too much because, in a sense, it was our opportunity, too.
But we and the American economy will soldier on. Maybe the super-committee will use its super powers to do great things. And maybe the federal government, if it can’t fix the problem can at least stop getting in the way of hard-working people trying to do their jobs. That would be a special moment, too.
James McCusker is a Bothell economist, educator and consultant. He also writes a monthly column for the Snohomish County Business Journal.