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Opinion: Standard & Poor’s: ‘Fair and balanced’ only gets you so far

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Want ‘fair and balanced’ without having to go to Fox News?

Just read the Los Angeles Times. At least when it comes to Standard & Poor’s.

In Sunday’s Business section, and then in Tuesday’s Op-Ed pages, The Times gives you dueling Michaels on the story of the credit rating service and its dire warnings about the U.S. debt.

In Business, columnist Michael Hiltzik is skeptical in ‘S&P should avoid political predictions’:

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What possessed S&P to inject itself into the biggest political controversy of the moment isn’t clear. Perhaps the firm wants to look relevant again, after abandoning its professional responsibilities in the run-up to the financial crisis of 2008.Possibly it’s looking to hang out its shingle as political consultantship, since its old business of rating fixed-income investments isn’t what it used to be. Possibly its analysts genuinely wish to communicate a warning about the nation’s fiscal path. The important question is whether S&P told us anything we didn’t know, or did it just muddy the debate over the deficit?

Hiltzik is right. S&P sold its soul in the subprime mortgage debacle, trading objectivity for revenue in giving stellar ratings to what turned out to be mostly worthless securities. As office wag Jon Healey said, ‘The U.S. government’s problem is that it didn’t pay S&P enough to keep it from threatening to downgrade our debt.’

But in Tuesday’s Op-Ed pages, columnist Michael Kinsley has quite a different take in ‘Thank you, S&P’:

Standard & Poor’s may know nothing that I couldn’t find out, but it certainly knows more than I’ve bothered to find out. (And how about you?) And how its experts assess all this publicly available information is surely worth knowing, isn’t it?

Kinsley is right. You have to trust the experts. Just because S&P was wrong before doesn’t mean it’s wrong now. Common sense says you can’t keep spending what you don’t have.

Isn’t ‘fair and balanced’ great? Now c’mon, Republicans and Democrats, let’s hear you: ‘Kumbaya, my Lord, kumbaya…’

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Didn’t think so.

Now, The Times’ editorial board has also weighed in on this story. Last week, in ‘S&P’s warning to Uncle Sam,’ it wrote:

Evidently S&P wasn’t impressed by the recent activity in Washington, including the deal to trim the government’s spending authority this year by nearly $40 billion and the House-passed budget resolution that would cut projected spending over the next decade by almost $6 trillion. Nor should it be. The right response to the country’s fiscal problems is an enforceable, long-term plan to eliminate the deficit and start paying down debt, and Washington has yet to adopt one. But there are more hopeful signs on that front than S&P’s warning would suggest.

S&P has moved on, though. On Monday, it took another swipe at the Golden State in ‘S&P sticks with ‘negative’ outlook for California’:

With budget talks between Gov. Jerry Brown and Republicans still at a standstill, Standard & Poor’s said in a report Monday that ‘the path forward is unclear’ for California, leaving the state at risk of issuing IOUs if the stalemate lasts into the summer.

Which, I suppose, we have coming, given our budget shortfall.

However, the story also says:

The firm gave high marks to the state’s economy generally. Its strengths include ‘a well-educated workforce, a capacity to attract venture capital, and prominence in the growing biotechnology and alternative energy industries,’ the report said.

So now I don’t know what to think. I guess I’ll just wait until Michael and Michael weigh in and tell me.

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It’s the ‘fair and balanced’ way, of course.

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--Paul Whitefield

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