When you think of Standard and Poor’s, or Moody’s or Fitch‘s. what comes to mind? I think of men of the age of J.P. Morgan. Substantial men in three-piece suits, in walnut-paneled offices. Accountants wearing green eyeshades, examining balance sheets.
I think of sober, conservative financial people, whose idea of a political hero might be William Howard Taft. Okay, so my sartorial daydream may be a little dated, and their patron saint today is probably Alan Greenspan. But I am pretty sure that the men and women of today’s credit-rating agencies are not wild-eyed socialists.
They are likely to be generally conservative in outlook and cautious about spending schemes. That‘s why I found the reasons for Standard and Poor’s most recent downgrade of Michigan fascinating.
Michigan’s credit rating was lowered last August after the legislature abolished the Single Business tax without offering anything to put in its place. The Republicans did that, in a complex way that prevented Gov. Jennifer Granholm from vetoing their move.
The problem was not that they got rid of the unpopular tax, which sometimes seems to punish businesses for hiring more workers. The problem was that they did it without offering a replacement for the revenue the state will lose next year.
The governor thought that was irresponsible -- and so did the credit rating agencies. They downgraded our creditworthiness eight months ago, with the clear implication that it would come back up when we got our house in order. You’d think that would be a signal that even a term-limited politician could understand.
Well, evidently not in Michigan. The legislature is still dithering, and seems nowhere near passing a replacement tax. Meanwhile, the general situation has gotten steadily worse.
The deficit for this fiscal year is out of control -- and that’s with money from the Single Business Tax still coming in.
The tax doesn’t expire until New Year’s Eve. Standard and Poor’s is now telling its clients that Michigan is the only state with a negative credit outlook. And S&P is telling state officials that they need to get Michigan’s house in order in the next few weeks, or face a further downgrading of our credit.
It’s up to us. Jim Wiemken, the managing director of Standard and &Poor’s who is in charge of Michigan, puts it this way: “Michigan’s credit outlook could be revised to stable if the legislature passes a reform package and addresses the remainder of the structural imbalance in the 2008 budget,“ he said a month ago.
And he added, “This is probably the most important legislative session in a decade.” What that means is that it is time for our political leaders to act like grownups. The budget has to be balanced.
Essential services have to be maintained. We have to set up a stable and sensible way to get the revenue the state needs to function, a way not based on smoke, mirrors and gimmicks. p> Okay, Lansing; you heard the man. Now just do it.