S&P downgrade coming tonight? (Updated: Downgrade: AA+)
Well, this is encouraging:
U.S. government officials are bracing for the rating agency Standard & Poor’s to downgrade the country’s credit as early as this evening or take other possible action, according to someone familiar with the matter.
Open comment thread to answer the question: How screwed are we?
UPDATE: ABC news adds more:
A government official tells ABC News that the federal government is expecting and preparing for bond rating agency Standard & Poor’s to downgrade the rating of US debt from its current AAA value.
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. [Emphasis added—Ed.]
So, it’s all your fault, Republicans.
UPDATE II: Politico’s Ben White (@morningmoneyben) tweets, "Senior govt official tells me S&P had planned to downgrade 2nite. And now may not. Weirder and weirder".
UPDATE III: Jake Tapper updated the ABC story above with new developments:
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.
What a strange set of developments.
Update IV: The Wall Street Journal provides a clearer look at what’s happening:
A mathematical error discovered late Friday by Treasury Department officials threw into limbo, at least temporarily, plans by ratings firm Standard & Poor’s to downgrade the top-notch AAA credit rating the U.S. has held for 70 years, people familiar with the matter said…
S&P officials notified the Treasury Department early Friday afternoon it was planning to downgrade the debt, a government official said, and the firm presented its report to the White House. S&P has previously warned such a downgrade might come if Washington didn’t move to comprehensively tackle its long-term fiscal woes.
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.
That’s an enormous mistake for S&P. If you’re about to issue a downgrade to the United States, you’d better check yourself, son. After this, the Treasury Department will go to the wall on S&P if they try to downgrade.
Big black eye for Standard & Poor.
UPDATE V: Holy crap! CBS White House reporter Mark Knoller (@markknoller) just tweeted: “S&P has downgraded US Treasury securities from AAA to AA+. S&P bills downgrade as an ‘unsolicited rating.’" Oh, it’s on now. S&P has got big brass ones, because the Treasury Department and White House will now go 10-8 on their ass, after finding that $2 trillion math error.
UPDATE VI: Well, the first responses for the downgrade are in at Reuters. They seem pretty measured. Optimistic even.
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Dale Franks
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Water is wet. Who knew?
If they do downgrade the US and interest rates go up then the debt ceiling deal will be even more worthless as the higher rates chew through the laughable cuts.
And the debt ceiling they worked up to take us past the election…that’s gone. We will be talking about debt in the next election. Oh, yeas, we will.
So S&P were going to actually blame the GOP for not wanting tax increases in their statement? They best tred lightly with that sh*t
I’d bet my lunch money that the Obama Administration is doing everything they can to intimidate the ratings agencies over this mess. As soon as a downgrade happens, just wait for Obama and company to respond by calling for regulating the companies into compliance.
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Nope. Not because of the debt ceiling farce…it was because of the spending, as they’ve been saying for months. The Republicans will get the blame because Democrats NEVER, NEVER, NEVER get blamed.
From the WSJ:
I understand your frustration. The media will certainly blame the Reps and the Tea Party. Nonetheless, I don’t believe that independents will be fooled.
This is disastrous for Obama to be presiding over the first downgrade since the Great Depression. He can blame Bush and whomever else, but for most Americans he is still the captain of the ship and we just scraped an iceberg.
I agree. Normally, the media storm would work, but people are already skeptical “unexpectedly” and they are sick of the lies “recovery summer.”
…and Nero “par-tays”! Nobody’s that stupid, this guy did it on purpose.
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“My friends, we live in the greatest nation in the history of the world. I hope you’ll join with me as we try to change it.” Barack Obama
How screwed are we? The phrase “screwed like a $20 hooker” comes to mind.
“After two hours of analysis, Treasury officials discovered that S&P officials had
miscalculated future deficit projectionscompletely ignored manufactured bullshit about cutting spending by close to $2 trillion. It immediately whined about their unwillingness to be taken in.”Fixed that for them.
You know, S&P could do the country a tremendous service if their (soon to be unemployed) spokesperon would come forward and say something equivilent to:
“We decided it was appropriate to ignore savings thru manufactured figrues pertaining to programs Congress and the White House haven’t even thought of yet that they agreed not to spend money on, and programs that we are assured will be trimmed or eliminated, but will not be.
The track record of the US government is clear in this matter, and while the American public may continue to be duped into believing these fictions, businessmen and investors cannot afford the luxury of investing in such a fantasy. S&P will restore the triple A rating when it becomes obvious there is serious action to control run away government spending, and when the government stops desiring to be rated based on performace they assure us will occur 15 years from now, and starts performing reasonably sometime in the near term.”
On a positive note – I am assured by an emigrant from South Africa who has worked and lived in many countries world wide – that if it gets bad here, it’ll be REALLLYYYYY bad almost everywhere else. Not much of a silver lining I suppose.
This downgrade was the only fair thing to do.
If it is based on a math error, I’m sure that in no time, they can borrow and spend their way there, unless they take it as a warning, a “wakeup call”, but we all know they won’t.
“Eventually, Socialists run out of other peoples’ money” — Margaret Thatcher
“Time has come today” — The Chambers Brothers
The government is pulling in about $2.2 trillion in revenue with around $14.5 trillion in debt. That debt number will most likely be on the high side of $16 trillion come 2013. Current GDP is around $14 trillion.
If you wanted to pay off the debt in 10 years after 2013 it would take $1.6 trillion a year leaving $600 billion for everything else. That is provided you’re balancing the budget. How is that front looking? We just had a deal to raise the debt ceiling by $2 trillion which will probably last us until 2013. In order to do this they ‘cut spending’ by $2 trillion dollars over 10 years. Ummm, errrr, that is 1.5 years of debt being off set by 10 years of cuts. What do you think they’re going to for the other 8.5 years? If you say, “Run up the debt again.” then you’re probably right.
Who would give this train-wreck a AAA credit rating? You can’t give unsustainable debt the highest possible credit rating and be taken seriously.
This was loooooonnnnnngggggg overdue.
Will freezing expenditures at, say, 2006 levels not even make a dent then yes? Eesh. We’re screwed. Unless there is a major course change in 2012. And, if I understand Dale’s numbers correctly, nearly a decade of very limited growth and politicians needing to make the hard choices. I am not hopeful, once the cuts start happening, for society.
Has anyone seen this by Mark Steyn: http://www.investors.com/NewsAndAnalysis/Article.aspx?id=580677&obref=outbrain
Yep. Obama didn’t start this mess, but…
Obama made it worse.
And of course, now the scumocratas are using this as a pretext to call for more new taxes.
Well that is the dems panacea for all budget problems?
The two Harry Reids…
But, just the other day, he was talking like a Fleebagger….
Call his bluff.
Isn’t this a really good example of “your ‘word’ is worthless” ?
Well, yes.
But we kinda know their are grains of sand at the beach, if you get my meaning…
Pelosi & Reid walking away,,,,,,, Come on Harry don’t tease us like that.
Hope and spare change at its finest. Have to say, though, hard to argue that this is undeserved.
“After two hours of analysis, Treasury officials discovered that S&P officials had miscalculated future deficit projections by close to $2 trillion.”
Pardon my skepticism, but I don’t put much stock in Treasury ‘analysis’ of future deficit projections. After all, the current year’s deficit is ‘close to $2 trillion’ and I see no reason why next year’s will be any less.
“ That’s an enormous mistake for S&P.”
I fail to see why you give the Obama administration more credibility than S & P.
What little I know about the S&P SNAFU indicates they used a “wrong” base-line assumption.
In other words, their error was in using the wrong lie…rather than the preferred lie.
NTTAWWT…in Washington.
BTW, does anybody recognize WHY there is a S&P with ANY credibility after the CRAP loan debacle…???
The answer is simple; BIG GOVERNMENT MANDATES that various financial institutions USE ratings by such firms as S&P, and conform policy to their edicts.
So, the swirlie just cycles ’round and ’round…
I note the difference between wrong and “wrong”. These days, however, I don’t think any baseline or projection can claim to be accurate. The only numbers out of Washington that I trust are historical ones, and then only as a comparison to other such numbers, not as absolutes.
This is another area where theoretical mathematics has real world(if you consider DC to be the real world) applications; fuzzy math.
http://en.wikipedia.org/wiki/Fuzzy_mathematics
‘Fuzzy math’ is no longer an insult to someone’s mathematical skills or a pejorative description of governmental accounting practices.
S&P has realized that they “dodged a bullet” with the MBS ratings. They know, based on the “fool me one, shame on you; fool me twice, shame on me” logic, that they won’t get anything even approximating the “free pass” the got last time.
You think they’re gonna get a free pass for this? They pissed in the big dawgs Wheaties with this. Look at Italy, they’re investigating S&P and Moody’s after gettting hit with a downgrade.
If anything, S&P will probably find itself under investigation for the MBS ratings simply as payback.
Hey, there’s something else Obama can say he inherited from Bush: a AAA rating!
Heh, heh…
Hard to argue with that.