Editorial: A call to action on economy

There was something hollow-sounding about President Obama's pronouncement Monday that America has "always been and will always be a triple-A country." Of course there is truth in what the president said -- but how sad that he felt the need to say it.

The often unhealthy relationship between Washington and Wall Street entered an unhappy new phase in recent weeks. The nation's capitol and Main Streets lost confidence in the financial industry after the subprime financial panic triggered a wearying and continuing economic slump.

But now it is clear that Wall Street's faith in Washington, and in the broader American economy, is also shaken, as evidenced by Standard & Poor's downgrade last week of U.S. government debt (from "triple-A" to AA+), and by weeks of painful stock price declines.

The U.S. market rallied Tuesday, and there is no sign of investors avoiding Treasury debt.

But the turmoil's message to policymakers of both parties could not be clearer or harder to dispute: U.S. economic policy is adrift, and without a sharp turn toward a dry-eyed, balanced plan to put it right, it is not at all clear that America "will always be" the invincible prosperity machine it has been in the past.

The most useless response to Wall Street's crisis of confidence is to denounce S&P's downgrade decision, kicking dirt on the umpire's shoes by citing the rating agency's failures during the subprime mortgage debacle and questioning its competence.

The logic here is elusive. It is the federal government's own continuing imprimatur that gives outsize clout to the opinions of the big ratings firms. And whatever S&P's many sins, they were mostly about being too generous, not too stingy, in giving AAA ratings.

The food fight ended with a half-hearted half-measure toward deficit control and featured numerous members of Congress and presidential candidates assuring the world that it hardly mattered if the United States failed to meet some of its spending commitments.

This is not the sort of assurance that typically comes from leaders of a triple-A organization.

The message is not that U.S. debt is unsafe -- just not quite so flawless as once believed. The weakness of America's economic recovery adds to the concerns, because growth is a necessary if not sufficient ingredient in any plausible debt-reduction plan.

So too does the sovereign debt crisis in Europe and the equal failure of politicians there to forthrightly address it.

Treasury bonds remain the world's most reliable investment, which is why many investors fleeing stocks are buying them. The real message is that the world economy as a whole is less safe and comprehensible than we thought. Unease and irritation is felt from corporate boardrooms to the riotous streets of east London.

The tricky policy maneuver needed is to stimulate a sputtering economy in the short term -- or at least avoid adding a fiscal drag by too quickly imposing spending cuts or tax hikes -- while putting in place a credible plan to stabilize and reduce debt over time.

But there is nothing mysterious about the shape of such a plan. It must put taxes, Medicare, Social Security, defense and everything else on the table.

The hard fact that must be faced is that any real remedy will be unpopular. America needs leaders willing to do the right thing for their country even if it's the wrong thing for their careers.

It isn't clear whether the nation has leaders of that rare and great kind today, but we must hope. Heroism only arises when it is needed.

A "triple-A country" also requires a brave and sober people. Americans must start rewarding leaders who demand shared sacrifice for the common good.

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