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Oct

9

Bond Rating Up for Pittsburgh… But other Shoes Will Drop

October 9, 2006 |

We’re all happy that Pittsburgh has managed to up its horrific bond rating from Moody’s Investor Services - from Baa3 to Baa2– to an average credit risk among most municipalities, and well above that of GM’s (which does not say much…).

However, knowing the degree to which balancing the deficits came with as little cutting-pain as possible to those at the trough, we - and all local and state taxpayers — can all look forward to the GAAP accounting rules that are to change in the next few years that will require governments to disclose the Net Present Value of Future Obligations on the balance sheets - just as any corporation must do.

When the new disclosure rules go into affect, politicians will have less wiggle room. Hopefully voters will demand that candidates explain TODAY how they are going to pay for the entire legacy of politicians’ election-time free lunch promises that are giant, lingering financial time-bombs before they accept new free lunches. Knowing the tendency of U.S. voters’ addiction to having their cake and eating it too, I’m not holding out a ton of hope that this will change things. Readers should note that as it stands, government accounting makes Enron accounting seem like an addition mistake on a Girl Scout’s cookie order form by comparison. When that pile of slop caused by endless free-lunch promises finally hits the fan, who knows what might happen, especially if voters can’t rein in current gargantuan deficit spending habits.

As for the Moody’s ratings, here’s a good link to an article that discusses how they tend to be generally overly optimistic, as well as how - currently - the markets seem to be way too indifferent to lending risks given the uncertain nature of the economy.


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