Report: U.S. bracing for possible downgrade from S&P; Update: “Expecting and preparing”; Update: S&P bungles numbers? Update: Calculations off by trillions

posted at 4:59 pm on August 5, 2011 by Allahpundit

Just a headline right now at CNBC, but stand by. Business Insider heard a rumor about this before lunch but discounted it when they couldn’t substantiate it with analysts. There must be something to it, though; it’s unthinkable that CNBC would toss this grenade without something very solid to support the story. Needless to say, the fact that news is breaking within an hour after the market closed suggests that they held it back to avoid a panic and to let investors digest it over the weekend.

A downgrade, not a default, was always the real worry during the debt-ceiling saga. Moody’s and Fitch reaffirmed the U.S. as AAA (albeit with a negative outlook) a few days ago but S&P was conspicuously silent. Negotiators on the Hill believed early on that the debt package had to reduce the deficit by $4 trillion to avoid a downgrade, but S&P’s president told a congressional committee on July 27 that it wasn’t true and that some alternate plans would be acceptable.

Updates are coming. While we wait for details, read this NYT piece from last weekend speculating that the economic fallout from a downgrade would actually be modest since, after all, treasuries are still comparatively safer than any other investment. The fact that Moody’s and Fitch disagree with S&P will soften the blow too. And frankly, if there’s anything that can force the Super Committee and Congress to get serious about entitlement reform, this may be it. Or am I just putting lipstick on a very smelly pig? We’ll know soon!

Update: A government source tells Tapper they’re “expecting and preparing” for a downgrade to either AA+ or AA. Unbelievable. Here’s the spin:

Officials reasons given will be the political confusion surrounding the process of raising the debt ceiling, and lack of confidence that the political system will be able to agree to more deficit reduction. A source says Republicans saying that they refuse to accept any tax increases as part of a larger deal will be part of the reason cited.

Of course, of course. Any rather large elephants in the room missing from that litany of excuses? Here’s a hint: It rhymes with “shmentitlements.”

Update: CNBC says the downgrade could come as early as this evening. In spite of everything, I’ve never really believed that America is in decline because, well, America simply doesn’t decline. Tonight I believe it.

Update: Lots of tough talk this week from Democrats about the Super Committee, with Reid hinting that they might walk away if Republicans don’t appoint anyone willing to agree to tax hikes and Pelosi promising much harder hardball during the next round of negotiations. Let’s see what they say now.

Update: Karl from the Greenroom e-mails to remind me that S&P’s track record is a bit of a joke given that they failed to see the subprime crisis coming. True enough. Last week Zachary Karabell at the Daily Beast wondered why anyone cares what S&P thinks:

To those who say that it’s unfair to blame the messenger—and that on the whole, these agencies are simply calling it as they see it and drawing attention to real risks—there is the pesky fact that they have a legacy of either being chronically late (the mortgage crisis) or then too eager to downgrade (overreaction to the mortgage crisis). And even if they were as good as they could be, they are still simply three companies with a few hundred unelected people making calls that drive the entire global financial system.

There is one last glaring question: should these agencies even be rating a sovereign entity such as the United States? The dollar is now a global currency of commerce, and U.S. Treasuries are a form of safe-haven currency. It’s not as if the world is unaware of the economic issues of the U.S. The Chinese don’t need Moody’s to tell them about the risks of holding a trillion dollars of U.S. bonds. Shouldn’t the “creditworthiness” of the United States, or the viability of a European debt plan for Greece, be left to the determination of investors large and small worldwide along with the governments of those countries and their electorates? The success or failure of their plans will be evident soon enough, and subject to the thumbs up or down of the people, without the ratings agencies piling on or offering a view.

Mark Steyn has the counterargument to that:

Nobody in Greece, Portugal, Spain, or Ireland is talking about “out years” and exciting plans for spending cuts in 2020. They’re getting on with it now — and they’re still being downgraded.

By contrast, both U.S. political parties are playing croquet on the lawn in August 1914 — and the ratings agencies are stringing along with them. Whatever the comparisons of debt-to-GDP ratios between Greece, Ireland, and the U.S., the actual hard dollar amount involved here is of an entirely different order. The Boehner plan tells us that real fiscal discipline is impossible within the U.S. political system. At some point, the ratings guys have to call them on it — or render their system meaningless.

Right. What’s ominous about the S&P downgrade isn’t that it comes out of left field, haphazardly, but that it doesn’t. Given the long-term outlook for U.S. sovereign debt even after this week’s deal, why wouldn’t they downgrade us? Why wouldn’t anyone else? What have you seen over the past year that makes you think America’s political class is remotely equal to the task of dealing with this problem before we have a Greece on our hands?

Update: Tapper updates his post with quotes from another government official who says they’re not sure when — or even if — the downgrade will come.

Update: It goes without saying that between the downgrade and polling showing 60+% support for tax increases on the rich, the GOP will be under intense pressure during the Super Committee phase to add some new revenue to the package. That doesn’t necessarily mean tax hikes; it does necessarily mean tax reform, which might involve lower rates but many fewer loopholes. Krauthammer floats a few ideas about that today, starting with getting rid of the mortgage interest deduction.

Update: Greg Pollowitz of NRO notes that, if the downgrade happens, the U.S. will technically be a greater credit risk than Britain, Germany, and France. Given the debt contagion spreading in Europe first from Greece and now Italy and Spain, does anyone seriously believe that’s true?

Update: No idea yet if this is the truth or White House spin, but if S&P actually botched its analysis on a matter as explosive and closely watched as this, then whatever’s left of their credibility is gone for good:

A third official says that S&P made a “serious mistake” in its analysis, “based on flawed math and assumptions,” so the Obama administration is pushing back. But even though “S&P has acknowledged its numbers are wrong, it’s unclear what they’re going to do.,” the official said.

S&P refused to comment.

Update: You’ve got to be kidding: “S+P was set to downgrade. Obama admin. said their analysis off by ‘trillions’. Now S+P revising figures. Downgrade still poss.”

Update: Still waiting for S&P’s side of this, but if the White House was lying in accusing them of a trillion-dollar error, you’d expect vehement pushback. Instead, silence.

Standard & Poor’s told the U.S. government Friday afternoon that it was preparing to downgrade the U.S.’s triple-A credit rating but U.S. officials notified the S&P that they had made a mathematical error that was off by “trillions,” an administration source told CNBC.

Apparently the error was in the calculation of the U.S. debt-to-GDP ratio over time and was based on a misreading of what the correct congressional baseline was

An S&P spokesman declined to comment on any possible plans for a downgrade or statement later Friday.

If it’s true, they’ll never recover. They’ve barely recovered from the subprime mess as it is. Then again, it could be that their math is fine and the White House is simply challenging them on a conceptual point, much like how Dems and the GOP argued this week over what tax baseline is appropriate for the Super Committee. In that case it wouldn’t be a math error, it’d be an accounting dispute.

A question from Megan McArdle, though: Who leaked this report? She wonders if the White House might have done it “just to get people yelling at the GOP,” but if that were true, why is the White House pressing so hard to get S&P change its numbers? It’s hard to yell at the GOP when the math is wrong.

Update: The Journal describes it as a “mathematical error” and claims S&P copped to it privately:

After two hours of analysis, Treasury officials discovered that S&P officials had miscalculated future deficit projections by close to $2 trillion. It immediately notified the company of the mistakes.

S&P officials later called administration officials back to say they agreed about the mistakes, though they didn’t say whether it would affect the rating. White House officials remained waiting Friday evening to see what the company would do…

A downgrade by S&P could serve as a psychological haymaker for an American economic recovery that can’t find much traction. It could lead to the prompt downgrades of numerous companies and states, driving up their costs of borrowing. Policymakers are also feeling anxious about the hidden icebergs that the move could suddenly reveal.

Imagine if this had happened during trading hours.

Breaking on Hot Air

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Maybe we should start asking the rating agencies to rate our individual states. That could be very illuminating and maybe even change the political picture in those states.

rockmom on August 5, 2011 at 7:07 PM

for that, the non-profligate states would have to secede :) now, that’s an idea :-)…but you are right, the extent of taxpayer’s rip-off here (I’m in Cali) is unimaginable…yet, this is not enough, they require fed money to support their bankrupt policies…pol establishment here disgusting and corrupt, not to mention the general lib idiocy and ineptitude (as in voter’s) plaguing the state…

jimver on August 5, 2011 at 7:42 PM

Maybe we should start asking the rating agencies to rate our individual states. That could be very illuminating and maybe even change the political picture in those states.

rockmom on August 5, 2011 at 7:07 PM

The rating agencies do that already, and that’s why the interest rates in those states you named, and a few others, must pay on their bonds is significantly higher than the other states who’ve been holding their expenses down. Those higher interest rates, in turn, lead to even higher tax needs in the spender states, which only adds to their financial woes.

One day, and I hope it’s not too late, these states’ taxpayers will get off the grass or booze or whatever makes them high, and say enough is enough.

TXUS on August 5, 2011 at 7:43 PM

hmmmm…zh:

McGraw-Hill: meet Chicago-style negotiations. And there, in one sentence, is all that is broken with this country. The reason for the beyond ridiculous horse trade, according to CNN: S&P analysis of U.S. revenue, deficit picture was questioned. Presumably S&P ignored to add the $10 quintillion dollars that were saved by America not declaring war on Tatooine and its most infamous Hutt resident: Larry Summers. Indeed, again according to CNN, S&P acknowledged some errors in its analysis. Isn’t it amazing what being threatened with having your NRSRO license can do for motivation to double check your work, eh you pathetic sellouts? Who would have thought that last week’s farce debt ceiling would continue and develop into a national pastime. Below, for the sake of S&P’s non-existent conscience and incompetence, are their own guidelines for what constitutes an AAA-rated credit. Readers can decide if the US is one. In other news, in USSAAA, government downgrade rating agency.

http://www.zerohedge.com/

you have to admit, barry has more class than the greeks…they just barged into the rating agencies offices and took the documentation

r keller on August 5, 2011 at 7:43 PM

Maybe we should start asking the rating agencies to rate our individual states. That could be very illuminating and maybe even change the political picture in those states.

rockmom on August 5, 2011 at 7:07 PM

A banker friend told me when this all shakes out he wouldn’t be surprised to see the solvent states try to legally unhook from the ones you mentioned; he didn’t exactly call it a you know what, but felt the United States couldn’t function in its present form

a capella on August 5, 2011 at 7:46 PM

Is this a case of Nomen Omen?…A grade being given by an agency that is in itself just standard and poor?

centre on August 5, 2011 at 7:47 PM

One day, and I hope it’s not too late, these states’ taxpayers will get off the grass or booze or whatever makes them high, and say enough is enough.

TXUS on August 5, 2011 at 7:43 PM

California too? you think??? it’s in the water here, and therefore in their system since they are born :-(…it’s all they know, liberalism, never been exposed to anything else… the responsible population of this state will relocate en masse at some point, but these people will still not change…guess Hollywood can take charge then, over 100% Hispanic population on welfare :-)…I see a lot of potential for wealth redistribution there, and, to paraphrase Ezra Klein, for ‘money moving around fairly’ :-)…

jimver on August 5, 2011 at 7:53 PM

Pleeeez downgrade us. Whatever it takes to stop the gross deficit spending. If the US won’t stop borrowing, then bring on the One True Debt Ceiling so it becomes prohibitively costly.

BTW, the federal government needs to fail so people will stop trusting it for their “salvation”. Sorry AP, but God will not be mocked.

exdeadhead on August 5, 2011 at 7:54 PM

These people are idiots, all of them.

All that’s left to repeat all the mistakes of the past is to stumble into another world war.

It’s a distinct possibility, sadly.

PattyJ on August 5, 2011 at 8:00 PM

The WH wants the downgrade to happen now, so they can blame the Tea Party.

faraway on August 5, 2011 at 8:00 PM

If true, S & P is a goner…

d1carter on August 5, 2011 at 8:03 PM

the GOP will be under intense pressure during the Super Committee phase to add some new revenue to the package.

Fine. Upon doing so, redefine mandatory spending to include only principal and interest payments on the debt.

All remaining expenditures become discretionary and subject to cuts.

“S+P was set to downgrade. Obama admin. said their analysis off by ‘trillions’. Now S+P revising figures. Downgrade still poss.”

Twisting both arms.

rukiddingme on August 5, 2011 at 8:04 PM

Interesting,

Key West Reader on August 5, 2011 at 8:06 PM

If S&P or Moody’s or any other rating service FAILS to downgrade the US, they are risking their ratings business.

It is obvious that Congress and Obama are not at all serious about controlling spending. Any rating service which fails to report something this big has proved that their opinion and their rating system is worthless.

landlines on August 5, 2011 at 8:08 PM

I dont believe anything they say. Remember Lawmaker probing if Treasury meddled in S&P rating

Wed Jul 27, 2011 8:09pm EDT

WASHINGTON (Reuters) – A congressional panel is examining whether the Obama administration tried to unduly influence Standard & Poor’s before the credit rater revised its outlook on the debt rating to negative

canditaylor68 on August 5, 2011 at 8:09 PM

The truth is most Americans do want to see some sort of tax increase.

The truth is they want to see taxes go up for someone else. Most Americans do not want to see their own taxes go up. Can you say hypocrite?

By all means, let’s govern via misleading, bogus polls. And then if we can get a majority to support slavery, we should start doing it again. Yeah, that makes perfect sense.

xblade on August 5, 2011 at 8:11 PM

Krauthammer floats a few ideas about that today, starting with getting rid of the mortgage interest deduction.

I don’t know what kind of deductions a landlord gets. Does he/she get a mortgage deduction and if we are doing away withn deductions, who will rent to us?

Vince on August 5, 2011 at 8:14 PM

No matter what.

We will be alright.

Times are tought; things are tight. We, Americans will always be okay.

Bilox Fucane Whatever, woke us up. We’re going to be fine.

Allow me to repeat myself at the risk of being rude:

We Are Going To Be Fine

Key West Reader on August 5, 2011 at 8:19 PM

A question from Megan McArdle, though: Who leaked this report? She wonders if the White House might have done it “just to get people yelling at the GOP,” but if that were true, why is the White House pressing so hard to get S&P change its numbers? It’s hard to yell at the GOP when the math is wrong.

Of course the WH did – that’s not even a question.

gophergirl on August 5, 2011 at 8:21 PM

Seems like all of the GOP’ers who voted for that bill got snookered by the Timmy Geithner of credit ratings.

SouthernGent on August 5, 2011 at 8:22 PM

Rise Up.

Key West Reader on August 5, 2011 at 8:22 PM

Key West Reader on August 5, 2011 at 8:19 PM

:) :) :)

I think all of this will make freezing my tooshie off at the inaguration of President Perry/Palin or GOP candidate TBD even more sweet.

gophergirl on August 5, 2011 at 8:23 PM

Romney has been brilliant keeping his mouth shut over the whole deficit/default crisis.

Everyone involved is going to get pulled into the quicksand, when people see their 401k halved again.

haner on August 5, 2011 at 8:24 PM

Maybe we should start asking the rating agencies to rate our individual states. That could be very illuminating and maybe even change the political picture in those states.

rockmom on August 5, 2011 at 7:07 PM

Seems they heard you.

rukiddingme on August 5, 2011 at 8:24 PM

Breaking: Downgrade on. S&P downgrades U.S. credit rating.

andy85719 on August 5, 2011 at 8:25 PM

BREAKING: S&P DOWNGRADES US GOVERNMENT.

amerpundit on August 5, 2011 at 8:26 PM

He needs to be impeached but it won’t be done.
This man is not emperor. He is utterly ruining the nation. Completely destroying America while he parties and vacations on our dime!

How will America last until he can be replaced. There will be nothing left if it. But it is not just Obama, all of these Democrats are as much to blame. He could not have gotten all of this if it wasn’t for those so willing to assist him in the congress.

Perry and or Palin need to come out and make their decision really soon. I am getting sick of waiting for either of them. If they don’t know what they are going to do by now than what is the point.

JellyToast on August 5, 2011 at 8:26 PM

S&P has downgraded US Treasury securities from AAA to AA+. S&P bills downgrade as an “unsolicited rating.”

andy85719 on August 5, 2011 at 8:26 PM

http://www.reuters.com/article/2011/08/06/us-usa-debt-downgrade-idUSTRE7746VF20110806

The United States lost its top-notch AAA credit rating from Standard & Poor’s on Friday, in a dramatic reversal of fortune for the world’s largest economy.

S&P cut the long-term U.S. credit rating by one notch to AA-plus on concerns about growing budget deficits.

commodore on August 5, 2011 at 8:27 PM

After two hours of analysis, Treasury officials discovered that S&P officials had miscalculated future deficit projections by close to $2 trillion. It immediately notified the company of the mistakes.

LOL.

crr6 on August 5, 2011 at 8:27 PM

Fox reporting downgrade is a done deal. That means the interest on the debt just went up.

crosspatch on August 5, 2011 at 8:27 PM

Occams Razor applies here:

If you downgrade the rating, I’ll have your families killed.

BobMbx on August 5, 2011 at 8:28 PM

BREAKING: S&P DOWNGRADES US GOVERNMENT.

amerpundit on August 5, 2011 at 8:26 PM

Holy smokes – I didn’t think they would do it.

Congrats Obama – you own this.

gophergirl on August 5, 2011 at 8:28 PM

Standard & Poor’s told the U.S. government Friday afternoon that it was preparing to downgrade the U.S.’s triple-A credit rating but U.S. officials notified the S&P that they had made a mathematical error that was off by “trillions,”…

WHAT??? You say the Obama administrationo can actually do math????

…then how come the Obamacrats can’t even issue an employment report which passes the sniff test and matches the figures released by BLS???

landlines on August 5, 2011 at 8:29 PM

crr6 on August 5, 2011 at 8:27 PM

S&P downgrades credit rating.

LOL

BobMbx on August 5, 2011 at 8:29 PM

So, in other words, after what appears to be a multi-trillion dollar error by S&P, the math still says “AA+”

ROTFLMAO at anyone less conservative than me.

BobMbx on August 5, 2011 at 8:31 PM

The United States lost its top-notch AAA credit rating from Standard & Poor’s on Friday, in a dramatic reversal of fortune for the world’s largest economy.
 
commodore on August 5, 2011 at 8:27 PM

 
Wow. Oh, and:
 

Thank you President Obama.
 
crr6 on May 1, 2011 at 10:45 PM

rogerb on August 5, 2011 at 8:32 PM

from the Reuters piece

The outlook on the new U.S. credit rating is negative, S&P said in a statement, a sign that another downgrade is possible in the next 12 to 18 months.

r keller on August 5, 2011 at 8:34 PM

after what appears to be a multi-trillion dollar error by S&P
 
BobMbx on August 5, 2011 at 8:31 PM

 
Just a rounding error these days.

rogerb on August 5, 2011 at 8:36 PM

So they’re off by trillions. Just like the current administration.

Remember when Everett Dirksen said “A million here, a million there; pretty soon you’re talking real money!”

GarandFan on August 5, 2011 at 8:36 PM

from the Reuters piece

The outlook on the new U.S. credit rating is negative, S&P said in a statement, a sign that another downgrade is possible in the next 12 to 18 months.

r keller on August 5, 2011 at 8:34 PM

In investment terms, that means “Sell”.

Woohooo! America goes cold turkey off of its spending addiction. First to fall…Pelosi’s Green the Capitol Initiative.

BobMbx on August 5, 2011 at 8:36 PM

After two hours of analysis, Treasury officials discovered that S&P officials had miscalculated future deficit projections by close to $2 trillion.

But miscalculated according to whose numbers? Can you really trust the Treasury numbers? Dont they do things wrong like assume Obamacare will lower the deficit. GDP growth will be higher than it is, etc?

Zaggs on August 5, 2011 at 8:37 PM

this hurts:

http://www.zerohedge.com/news/sp-downgrades-us-aa-outlook-negative-full-text

We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade.

r keller on August 5, 2011 at 8:38 PM

It had to happen, but I still feel sick.

andy85719 on August 5, 2011 at 8:38 PM

misreading of what the correct congressional baseline was…

The “congressional baseline” is the root of our problem.

More like S&P got a phone call from a certain, particular Chicago thug that now lives (for a few more months) in Washington, DC.

We do NOT deserve a AAA rating. There, I said it.

stenwin77 on August 5, 2011 at 8:39 PM

It goes without saying that between the downgrade and polling showing 60+% support for tax increases on the rich, the GOP will be under intense pressure during the Super Committee phase to add some new revenue to the package.

Mortgage interest deduction on second homes, absolutely.

In addition:

1. End the deductibility of union dues. There’s no reason they should be deductible when union dues are principally a slush fund for democratics.
2. End or limit the deductibility of state income taxes and property taxes on federal itemizing. By allowing full deductibility here the federal government is subsidizing (ie forgone revenue) poorly run states.
3. Make some or all of what your employer pays for your healthcare insurance part of your taxable income. There’s no excuse for those that buy their own insurance to pay with after-tax dollars when employers are using what are essentially pre-tax dollars.

slickwillie2001 on August 5, 2011 at 8:40 PM

We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade.

Emphasis mine. No other explanation required.

BobMbx on August 5, 2011 at 8:40 PM

How long will the other rating agencies hold out..?

d1carter on August 5, 2011 at 8:41 PM

I suspect the tea party will be blamed for the downgrade. S&P’s statement seems to indicate that they would have accepted a clean debt ceiling increase. Yuck.

andy85719 on August 5, 2011 at 8:41 PM

To paraphrase R. Reagan:

We are in an economic crisis that will not go away soon, but it will go away.

As for the economists at Standard & Poors there is an old carpenter’s saying that you would do well to remember:

Measure twice. Cut once.

A little less Excel and a little more brainpower, or that asking to much from folks who undoubtedly attended public school?

If the federal government followed Dave Ramsey’s Financial Peace University plan we wouldn’t give a rat’s a$$ about our credit rating!

Bubba Redneck on August 5, 2011 at 8:41 PM

A decent President would not bother to run for re-election after this.

pedestrian on August 5, 2011 at 8:42 PM

But TurboCreditRating said we’re AAA!

Text from Geithner to the recently most-powerless man in DC

BobMbx on August 5, 2011 at 8:44 PM

A decent President would not bother to run for re-election after this.
 
pedestrian on August 5, 2011 at 8:42 PM

 
Ah, but ours has never shown common decency. Showing himself as common, yes. Decent, no.

rogerb on August 5, 2011 at 8:44 PM

this is the key graf that will drive the pols.

esp. wrt the “super committee”…what to cut what to tax.

remember, the Left wants 23 percent of gpd (CAP)

We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade.

r keller on August 5, 2011 at 8:46 PM

Why does anyone care what the S&P thinks?

From Marginal Revolution: http://marginalrevolution.com/marginalrevolution/2011/08/a-few-quick-thoughts-on-the-likely-pending-sp-downgrade.html

As a simple rule of thumb, if at this point, in response to this news, a commentator attacks the ratings agencies for their previous mistakes and stupid, corrupt behavior, it’s a sign the commentator is trying to muddy the broader issues at stake. Such commentators may well be correct in their criticisms, but probably they are not facing up to their recent mistakes and seeking to shift the blame. Watch out for this.”

RomanticIdeal on August 5, 2011 at 8:48 PM

OMG!

redridinghood on August 5, 2011 at 9:01 PM

AA+

redridinghood on August 5, 2011 at 9:02 PM

ABC News Radio just announced that S&P downgraded the U.S. credit rating to AA+.

bw222 on August 5, 2011 at 9:04 PM

“Mr. President, shall we get the banner you ordered after your inauguration out of storage?”
 
“Monday, sweetie. We’ll hang it for the press conference.”

rogerb on August 5, 2011 at 9:10 PM

Totally the fault of the teabagger Republicans who made it clear that they were willing to ruin the country to get their way.

Flat out opposition to closing loopholes or even the slightest tax increase on million/billionaires demonstrated that the Republican party is out of touch with reality and that the U.S. Congress is profoundly broken.

Well played, teabaggers!

chumpThreads on August 5, 2011 at 9:21 PM

chumpThreads on August 5, 2011 at 9:21 PM

Fortunately for you, gross stupidity isn’t a crime. Otherwise you’d be serving multiple life sentences.

Uncle Sams Nephew on August 5, 2011 at 9:25 PM

AP:

A downgrade, not a default, was always the real worry during the debt-ceiling saga.

Oh really? After you used the term “default” in every post about the debt ceiling limit for weeks?

2ipa on August 5, 2011 at 10:21 PM

chumpThreads on August 5, 2011 at 9:21 PM

I don’t usually call names, but you are an idiot.

The Tea Party came about because of the reckless spending by both the Republicans and the Democrats, but the Democrats once they had the White House, Senate and House put the pedal to the metal and accelerated the spending beyond what was even fathomable. And idiots like you called us “racist” for asking them to stop frittering away our country and children’s future.

Fallon on August 5, 2011 at 10:30 PM

Mr. President, you must understand that once you turn 50 your whole world turns to sh!t !

tim c on August 5, 2011 at 11:23 PM

Soros must be turning cartwheels–right alongside BO–in the East Room. Even better than a barefoot Congo line. Meh.

herm2416 on August 5, 2011 at 11:24 PM

There is one last glaring question: should these agencies even be rating a sovereign entity such as the United States?

Oh, no, no. Governments should rate themselves.

AshleyTKing on August 5, 2011 at 11:40 PM

There is one last glaring question: should these agencies even be rating a sovereign entity such as the United States?

Oh, no, no. Governments should rate themselves.

AshleyTKing on August 5, 2011 at 11:40 PM

Yeah, brilliant question isn’t it? I guess if that sovereign entity wasn’t selling their financial instruments on the public markets it would be a good question.

slickwillie2001 on August 6, 2011 at 12:37 AM

Update: Calculations off by trillions

Yeah, right.

Dr. ZhivBlago on August 6, 2011 at 2:44 AM

The rumor was there all day, so, in a very real sense, it did happen during trading hours. But the rating isn’t as important as you might think )(though it is something that gives pause). US debt was already trading at a discount to several AA credits (like Japan). There is an issue for portfolio managers, who might not be able to buy AA debt.

The bigger problem is for S&P. They’ve screwed up everything for the last five years, and cost investors billions. The Justice Department is a formidable enemy, but they have left S&P alone even though there has been enormous political pressure to after the company. They are dead men walking.

MTF on August 6, 2011 at 9:04 AM

Apparently the error was in the calculation of the U.S. debt-to-GDP ratio over time and was based on a misreading of what the correct congressional baseline was…

Ok I’ve seen the numbers… and everyone is on high quality drugs… everyone.

We have 14.5 trillion in debt right now… give or take a bit. We’re running 1.5 trillion deficits right now, with projections of over 1 trillion for the near future.

So what will our debt be in 10 years?

S&P said 22 trillion, the WH Administration and the CBO only say 20 trillion.

So we’re only going to add 5.5 trillion in debt over the next 10 years while adding over 1 trillion every year?

Man someone has some pagic built into their math here… lets look for it.

http://www.cbo.gov/ftpdocs/120xx/doc12039/01-26_FY2011Outlook.pdf
The CBO thinks we’ll only have a 500 billion dollar deficit in 2014 because the government will take in 3.442 trillion instead of the 2.228 trillion they took in for 2011.

So we’ll see a 54% increase in government revenues in less than 3 years… and spending will only go from 3.708 trillion to 3.975 trillion… so over the next 3 years, when Congress sees they’re getting 54% more revenue they’ll only increase spending by 7% total for 3 years.

Anyone buy that? Anyone at all? If in 3 years we give congress 154% of what we’re giving them now they’ll only spend 107% of what they’re spending now?

THIS is the “sane rational, respectable” projection?

And the “net interest” for 2014? 394 billion. On our projected 17+ trillion in overall debt. Or under 2.5%… so we’ll need interest rates to stay low forever.

Well that’s a fine projection. Interest rates will stay low forever, housing prices will never go down, dot-net stocks can never lose value and are always a good investment… oh wait, ignore those last two… those were from previous projections.

Now you might ask “how do we get 54% more revenue?”.

Easy, see unemployment will go back to 5.3% by 2016… the economy will rebound fast and hard inside of a couple years and employment will be much better. Even with the discouraged workers back to looking again we’ll have an economy that will rehire 5% of the total population of the country.

The GDP skyrockets from out current 14.8 trillion to 24 trillion within a decade… it’ll be the greatest growth explosion you’ve ever seen. And this is the only way we can possibly project that our debt will ONLY be 20 trillion dollars.

To reiterate my first point… everyone is on high quality drugs… everyone.

gekkobear on August 6, 2011 at 5:45 PM

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