Rebel With a Cause

Paul Goldman

The Moody's Blues


The Moody's decision to put Virginia on credit watch could prove disastrous to the Democrats' reputation for fiscal responsibility -- unless Gov. Warner turns the tables on the Republicans.


For most Virginians, getting two A's on a report card would be a reason to celebrate. Perhaps this is why Gov. Mark R. Warner's chief bean counter, Finance Secretary John Bennett, seems unfazed by the fact that Moody's, the bond rating agency, has put Virginia on its credit watch list. Being put on the list means that Moody's might downgrade Virginia's bond rating from AAA to AA status.


Bennett may believe that this is no cause for worry, but if Moody's does take away Virginia's AAA bond rating, it will kill state Democrats in 2005. It also will undermine Warner's prospects for unseating U.S. Sen. George Allen (R) in 2006.


Academics and editorial writers say the AAA rating has taken on a mythical meaning disproportionate to its fiscal and budgetary importance. But even assuming those pundits are correct, the political fallout of a lowered bond rating would be devastatingly, and, yes, disproportionately bad for Democrats.


Moody's says Virginia "has experienced a significant deterioration of its balance sheet over the past two years" on top of the $217 million fiscal year 2002 accounting deficit that state officials have never fully acknowledged.


Fact: The politicians in Richmond have repeated nearly every budget gimmick and one-time "fix" that they condemned when it was first used or suggested by our last governor, a Republican, "Deficit Jim" Gilmore.


Indeed, they have invented new ones, only keeping the budget in "balance" by accounting tricks and continuous draining of the rainy day fund, possibly in violation of state law and certainly in violation of the spirit of that law.


Once again, Virginia Democrats may be falling into a fiscal trap set by the Republicans. You can take the following to the bank: The GOP General Assembly majority won't be accepting any blame for any credit watch fiasco or actual rating reduction. Already, GOP members are saying that this problem has happened on Warner's watch, while displaying convenient amnesia about their own fiscal blundering. Maybe Virginians recognize the truth. Maybe not.


Right now, three things can happen, and the first two aren't good for Democrats:


Options 1 and 2: Virginia stays on the credit watch list or its credit rating gets downgraded. Either of these scenarios threatens to make Republicans out of most Virginia voters for a long time to come.


That leaves Option 3: Getting off the credit watch list ASAP.


But Bennett's be-happy, don't-worry approach plays right into GOP hands, letting Republicans claim that the governor has "no exit strategy."


I say turn the tables: Have Bennett develop a plan. Then the governor calls a special General Assembly session to deal with the state's growing structural deficit once and for all. In that way, Warner could submit a plan to correct what needs correcting and force Republicans to be either part of the solution or part of the continuing problem.


If Warner doesn't act soon, though, Democrats could be singing the Moody blues for years to come.


-- September 25, 2003


This column was originally published in the  September 21, 2003 edition of The Washington Post.


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Paul Goldman, the Rebel With a Cause, was chief political strategist for the past two winning Democratic governors in Virginia and was credited with leading a "revolution in American politics" by The New York Times for his role in breaking America's 300-year-old color barrier in national politics.


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