A top official at Standard & Poor’s pushed back Saturday against the Obama administration’s criticism that their decision to downgrade the nation’s credit rating was based on “flawed” math.
The administration had tried to prevent the downgrade announced late Friday by telling S&P that the agency had made a $2 trillion error in its calculations about the federal budget.
But John Chambers, managing director and chairman of S&P’s sovereign ratings committee, explained to Fox News on Saturday that the downgrade was “motivated by a number of factors.”
“One was the political gridlock in Washington, which make us think that it’s going to be difficult for elected officials to put the fiscal profile of the U.S. government on a long-term sustainable path,” he said.
“And part of it was because of the fiscal path itself,” he said, explaining that U.S. debt accounts for 75 percent of gross domestic product and will “trend up over the next decade unless we get additional fiscal measures than what we have on the table right now.”
The agency was also worried that the eleventh-hour budget deal reached last weekend fell short of S&P’s expectations, he said. S&P was seeking $4 trillion in budget cuts over the next decade. But Congress passed a plan on Tuesday that slashes up to $2.4 trillion in cuts over that time.
“If you get to the $4 trillion figure — which had been mentioned by the Bowles-Simpson commission, which had been mentioned by the president in his April 13 speech, which had been mentioned by Paul Ryan in his alternative budget — that, if you have decent growth behind it,would have done the trick,” Chambers said.
Some Democratic lawmakers reacted to the downgrade by attacking S&P’s credibility.
“I find it interesting to see S&P so vigilant now in downgrading the U.S. credit rating,” said Sen. Bernie Sander, a Vermont independent who votes with Democrats.
“Where were they four years ago when they, and other credit rating agencies, helped cause this horrendous recession by providing AAA ratings to worthless subprime mortgage securities on behalf of Wall Street investment firms?” he said. “Where were they last December when Congress and the White House drove up the national debt by $700 billion by extending Bush’s tax breaks for the rich?”
Massachusetts Rep. Barney Frank, the top Democrat on the House Financial Services Committee, said that the rating agencies have a horrible record and people should pay no attention to them.
But Chambers said the agency’s record speaks for itself.
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5 Responses
If the interest rates on Federal bonds don’t rise substantially, S&P will be serious embarassed. They are already in some disrepute since they gave AAA ratings to mortgage bonds that turned out to be worthless.
Its interesting to note, that for the past month everyone was all worried that the US ratings may get downgraded. Everyone was talking on how to prevent it. Now that S&P downgraded the US rating, we hear how S&P has no credibility and we shouldn’t pay attention to what they say. Why didn’t they say this for the past month? Why didn’t we hear barny frank the past month telling us how the S&Phas a horrible record and we should not pay attention to them. Only now after the fact when everyone looks like fools do they say this to cover up.
The one we shouldn’t be paying attention to is Barney rubble
malul, both sides tell only half of the emmes. But if you put the two halves next to each other, you will get an accurate picture, which is: (1) Standard & Poor indeed has a poor track record; and (2) Despite its poor record, S&P’s downgrading of US Treasury credit has credibility only because it officially confirms what you and I already know that America and Americans spend more than they make, and that sooner or later it will catch up with us. When that happens, it will be like a Yom HaDin.
We elected President Obama.
The sharp jump to sustained $4+/gal. oil, the known unemployment rate hovering around 10% for 3 years running, the lack of a recovery, the impending double dip, the market crashes, the credit crunch, the strained relations with traditional allies and the continued hostility from implacable enemies who were not assuaged by our abusing our formerly strong friendships, the withdrawal from Iraq under fire and the nuclearization of Iran.
The damage of electing Obama has been done, and America’s economy, prestige and security may be irretreivably diminished. We can only hope that this sad and unnecessary decline will be a lesson for future generations in the wisdom of placing audacious hope before common sense.