Trust (noun) 1. reliance on the integrity, strength, ability, surety, of a person or thing; confidence. --Random House Dictionary
The markets are on a roller coaster ride again, with dips and surges reminiscent of 2008. Some market watchers peg this return of stock volatility directly to the announcement on August 5th that the Standard Poors (S&P) Rating Agency had downgraded United States long-term government debt from AAA status, its highest, to AA+. For the first time since 1917 when such ratings began, Uncle Sam’s ability to guarantee its debt to lenders, is being questioned. Through the Great Depression and two world wars, American debt has always been AAA, and was considered a golden investment: rock solid, dependable, and most important trustworthy. As the term goes, “the full faith and credit of the United States government”. But apparently, no more, at least not in S&P’s opinion.
The downgrade evoked some harsh responses beyond Wall Street. Politicians and pundits opined that given S&P’s abysmal past record of rating mortgage backed securities during the 2008 meltdown (it gave AAA grades to debt which completely tanked), the company has no leg to stand on. Some also pointed out that the other two ratings agencies, Moody’s and Fitch, still considered American debt AAA. But lost in the debate is one truth S&P attempted to hammer home in its downgrade. As their downgrade report stated, “The political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy … [This] weakens the government’s ability to manage public finances.”
Shorthand: S&P no longer trusts the folks in charge of making sure that America can make good on the money we owe. It’s not just the level of government debt which worries S&P and many others. As a percentage of gross domestic product the United States has been more deeply in hock, as during World War II. Instead S&P’s fiscal slap in the face to the feds is also about plain old trust, or the lack thereof. Can Uncle Sam and the American people actually be trusted to do all that which is necessary to reform entitlements programs, reform the tax code, rein in spending, and guarantee the long term solvency of Social Security and Medicare?
As the author G.I. wrote in “The Economist” magazine last week, “[The American] economy is lubricated by a sophisticated and stable credit market whose most vital component is also the most ephemeral: trust. As the [debt ceiling] crisis amply demonstrated, when trust erodes, the system freezes up. America has built a reputation for responsible and credible management of its finances over the centuries, and that reputation has been reduced to a political football…. Henceforth a foreign pension fund or central bank that once mindlessly ploughed his spare cash into Treasuries will have to think twice.”
Can we be trusted? Trust as a human virtue is central to anything and everything that matters in this life. Folks of faith live by their belief in a trustworthy and faithful God to guide them. “Trust in the LORD forever, for in the LORD GOD you have an everlasting rock.” (Isaiah 26:5) Trust is at the heart of all our human relationships: between spouses, parents and kids, and neighbors and friends. We need to be able to trust the institutions which govern our lives: the Church, education and schools, and family. When trust is present, we have confidence. With trust we move through life with vigor and energy, believing that the ground we stand upon is solid, unmoving, and worthy of our fidelity.
But without trust? Life just rocks and rolls. Marriages crumble and fall apart. Families split. Institutions falter. The terra firma each of us so needs to stand upon for support shifts uncomfortably and in that shift we become afraid and we stumble and maybe even begin to worry if anything or anyone can ultimately be trusted. Not a very comfortable place to be, life without trust.
And so as our nation and its citizenry contemplates the continuing fallout from the debt crisis, we need to face into the even larger and more profound question of “the trust crisis”. Can we trust the women and men we vote into public office to do the right thing and not merely the politically expedient thing? Can we trust that they will keep all of our interests in mind, America as a whole, and not just the petty and often narrow interest of getting re-elected or keeping high priced lobbyists and Washington elites happy? Can we trust ourselves as citizens to have the fortitude and unselfishness to make the sacrifices necessary to keep our civic ship afloat for generations to come? Tough questions with no easy answers.
So as our national economic debate continues, I pray we will keep one thing in mind. It’s not just about the debt. It is also about trust.