Washington Merry-Go-Round

IMMEDIATE RELEASE August 8, 2023
WASHINGTON MERRY-GO-ROUND
Today’s Events in Historical Perspective
America’s Longest-Running Column Founded 1932
When bias supplants neutrality
By Douglas Cohn and Eleanor Clift         
 
          WASHINGTON —The fabric of the nation is being undermined by the very people and institutions the public has historically relied upon for truth and fairness. Look at the judiciary, the disseminators of information, and even the obscure arena of economic rating services.
          The decision to downgrade America’s credit rating from “AAA” to “AA+” makes no rational sense, and drew a sharp rebuke from Treasury Secretary Yellen, who called the action by Fitch Ratings “entirely unwarranted.”
          The move was initially overshadowed by the blanket coverage of the second federal indictment of former President Trump, but the markets reacted with a major sell-off. The Dow closed 348 points down, and Yellen doubled down on her criticism of Fitch, saying the ratings agency failed to account for the U.S. economy’s resilience, with inflation falling, historically low unemployment and strong innovation.
          Yellen didn’t say so directly, she’s too polite, but if America’s economy isn’t triple-A rated, whose is?
          The dollar is the strongest currency in the world. U.S. treasury bills are universally recognized as the safest place to put money. The Chinese government is one of the biggest investors in American T-bills.
          Fitch’s rationale for taking the U.S. credit rating down a notch centered on the recent standoff over raising the debt ceiling coupled with an “erosion of governance” to control rising debt.
          It’s hard to take these sudden critiques seriously since brinkmanship around raising the debt ceiling is not new. It’s been a feature of divided government for decades. And the percentage of debt to GDP is only marginally higher than it was in the 1940s. Then, the country was emerging from the Great Depression and World War II and heading for the greatest boom period in our history Today, the country is recovering from the Great Recession and the Covid Pandemic, and the economy is roaring.
          In any event, Fitch’s decision coming as it did without warning adds to the erosion of faith in institutions, all institutions.  Rating agencies are supposed to be above politics, and this decision – characterized in a Washington Post editorial as “A bizarre downgrade of U.S. debt”– invites speculation as to why Fitch would choose this time to drop this bombshell.
          The news has been so positive on the economy that the Federal Reserve has withdrawn its prediction of a near term recession. At the same time, our democracy faces new challenges with the growing likelihood that Trump will be the Republican nominee and could return to office despite multiple indictments for obstruction and fraud.
          The latest indictment of the former president on four felony accounts of trying to obstruct and overturn the 2020 election is being treated by the former president’s supporters as a miscarriage of justice carried out by Trump’s political enemies.
          Trump calls it “election interference” and claims “this would all go away” if he were not running for president, or not ahead in the polls. Instead, he is 38 points ahead of his nearest Republican competitor, and in a tie with President Biden in a hypothetical 2024 matchup.
          How can this be that a former president charged with trying to overturn an election he lost is in contention to possibly return to power?
          Much of the answer lies in erosion of belief in institutions and in mutually agreed upon ideas and facts, such as the rule of law – and in the corrosive power of social media to spread lies and misinformation and turn political factions against each other.
          The origin story of this erosion of belief in our institutions can be found in the Bush v. Gore Supreme Court decision of 2000 that stopped the vote counting in Florida and handed the presidency to George W. Bush. That 5 to 4 unsigned decision, widely seen as politically biased, contained the seeds of the attempted Trump-led 2020 conspiracy to overturn the electoral votes in seven battleground states.
          When we question whose hidden hand is behind key decisions and see bias behind every move, it is only natural to question why a key rating agency steps into the fray. It smacks of political bias well in an age of biases that have supplanted the basic principles of truth and neutrality expected from those upon whom the public relies in a functioning democracy.
 
          Eleanor Clift’s latest book Selecting a President, and Douglas Cohn’s latest books The President’s First Year: The Only School for Presidents Is the Presidency and World War 4: Nine Scenarios (endorsed by seven flag officers).
          Twitter:  @douglas_cohn
          © 2023 U.S. News Syndicate, Inc.
          Distributed by U.S. News Syndicate, Inc.
END WASHINGTON MERRY-GO-ROUND