S&P must feel as if it just can't do anything right when it comes to rating the U.S. debt.
Financial markets and investors largely ignored Standard & Poor's when it downgraded U.S. debt in August 2011 in the wake of Congress and the White House narrowly averting a debt ceiling crisis by enacting the Budget Control Act. In fact, in spite of S&P's new assessment that they weren't as good an investment, interest rates went down rather than up as Wall Street did what it typically does in the face of increased uncertainty: It bought more Treasuries.
And with interest rates falling and their constituents' personal finances unaffected, members of Congress ignored the downgrade.
In other words, the S&P action had virtually no impact. The only thing that took a hit was S&P's own corporate reputation.
That reputational hit was fully evident yesterday when S&P reversed course and upgraded the U.S. debt rating...and received even more scorn for doing so than it did back in 2011. The negative reaction (I especially liked this story by Neil Irwin in Wonk Blog at The Washington Post and this one by Adam Sorenson of Time) wasn't because the upgrade wasn't justified; it mostly was that S&P shouldn't even be in the business of rating U.S. because -- up or down -- what it says is meaningless.
In other words, other than taking a rhetorical flourish away from those on Capital Hill and elsewhere who want to keep talking about a federal budget crisis that never seems to arrive, the S&P upgrade will have the same impact on the debate as was the case with the downgrade -- none.
