So, the S&P Can Do Math But the Treasury Can't?
Isn't this a lamentable spectacle. The US Treasury and Standard & Poor’s cannot even agree whether there's been a two trillion dollar error in S&P's calculations, or whether a two trillion dollar accounting error should "materially change" their assessment. Moreover, the discussions about it were "private," despite affecting pretty much everyone on the planet:
The Treasury disagreed with S&P’s assessment and judged the analysis was carried out hastily, said a person familiar with the matter who declined to be identified because the discussions were private. ...
The ratings firm erred in estimating discretionary spending levels at $2 trillion higher than what the Congressional Budget Office estimates, the person said.
After being alerted to that, S&P lowered its calculations by $2 trillion and then relied largely on judgments about the U.S. politics to support the downgrade, the person said. The Treasury was presented with the S&P analysis shortly before 2 p.m. yesterday.
In response, S&P concluded that using the Treasury’s approach to the CBO’s figures didn’t materially change its assessment of the U.S. financial condition, according to a person familiar with the talks between S&P and the Treasury. David Wargin, an S&P spokesman, declined to comment.
Fabulous transparency. Way to convince the world that everything's under control.
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May '10
Re: So, the S&P Can Do Math But the Treasury Can't?
Has the double post ceiling been raised?
Dec '10
Re: So, the S&P Can Do Math But the Treasury Can't?
Is this the beginning of the end or the beginning of seriousness on the part of our representatives? It really could go either way.
May '10
Re: So, the S&P Can Do Math But the Treasury Can't?
Here's a link I shared on the other thread about S&P: An Empire at Risk, written by Niall Ferguson, almost two years ago.
I hope that this signals the beginning of seriousness on the part of Congress. The Ryan plan was encouraging, and actually did address one thing Ferguson pointed out: "If the United States doesn't come up soon with a credible plan to restore the federal budget to balance over the next five to 10 years, the danger is very real that a debt crisis could lead to a major weakening of American power."
We must continue to push for Congress leaders to develop and implement that "credible plan." That is what will convince the world that things are being brought back under control. We won't do that when, for example, our Senate refuses to pass a budget for over 800 days...
Dec '10
Re: So, the S&P Can Do Math But the Treasury Can't?
Richard Stewart: We must continue to push for Congress leaders to develop and implement that "credible plan." That is what will convince the world that things are being brought back under control. We won't do that when, for example, our Senate refuses to pass a budget for over 800 days... · Aug 5 at 10:54pm
With the current group we have I don't hold out much hope. I'm torn between mourning for our ailing nation and have joy that there's no way the democrats can escape responsibility for their profligate spending. Perhaps we have hit bottom and can start the recovery process now.
Jun '10
Re: So, the S&P Can Do Math But the Treasury Can't?
Error? If you mean 1 + 1 = 3 then you have an error. If on the other hand, Claire, you mean that the treasury and S&P used different assumptions to get to different places, you, meaning Americans, have a bigger problem than mere error. What likely happened in the heated conversations, and make no mistake the conversations were heated, S&P revised their assumptions to come into line with the feds demands. The word browbeaten might be a more apt descriptor of the process. The foregoing is all speculation, of course, but error is most likely a word chosen for public consumption.
Edited on Aug 5, 2011 at 11:31pmFeb '11
Re: So, the S&P Can Do Math But the Treasury Can't?
Sounds like the parsing of accounting terms. What I hear from the S&P is, we "may" have a two trillion dollar difference but the US is so deep in debt that it does not change the overall trajectory. Hence the use of "materially" to discount the "difference". If this isn't a wake up call I don't know what is.
Re: So, the S&P Can Do Math But the Treasury Can't?
Cas Balicki: Error? If you mean 1 + 1 = 3 then you have an error. If on the other hand, Claire, you mean that the treasury and S&P used different assumptions to get to different places, you, meaning Americans, have a bigger problem than mere error. What likely happened in the heated conversations, and make no mistake the conversations were heated, S&P revised their assumptions to come into line with the feds demands. The word browbeaten might be a more apt descriptor of the process. The foregoing is all speculation, of course, but error is most likely a word chosen for public consumption. · Aug 5 at 11:27pm
Edited on Aug 05 at 11:31 pm
Exactly. And obviously. The impression of a lack of transparency--and the reality of it--is simply terrible for the world.
Jul '10
Re: So, the S&P Can Do Math But the Treasury Can't?
If you think Turkey is bizarre, have you ever tried living in the DC area? Cuts mean less unsustainable growth, baseline means $9T in increased spending over ten years (unless it's twelve to prop up some off the cuff remark misread from the TOTUS, and tax cuts are government expenses. Being called racist means you are getting warm, being called stupid means you are getting hot, and being called a terrorist means you've found the problem. And there are always language changes with each season. Default was suddenly very in last month, now downgrade is all the rage.
May '10
Re: So, the S&P Can Do Math But the Treasury Can't?
The King Prawn
Richard Stewart: We must continue to push for Congress leaders to develop and implement that "credible plan." That is what will convince the world that things are being brought back under control. We won't do that when, for example, our Senate refuses to pass a budget for over 800 days... · Aug 5 at 10:54pm
With the current group we have I don't hold out much hope. I'm torn between mourning for our ailing nation and have joy that there's no way the democrats can escape responsibility for their profligate spending. Perhaps we have hit bottom and can start the recovery process now. · Aug 5 at 11:00pm
We are not even close to the bottom yet - but we have exhausted time for a reasonable improvement process. I am afraid we lack the leadership and will to do what has to be done until it is done to us. It is not going to e a joy ride.
Assigning blame has become a luxury that we can not afford.
Sep '10
Re: So, the S&P Can Do Math But the Treasury Can't?
Ten year budget projections have more in common with fiction writing than accounting. Neither I nor anyone else knows if we might have a recession next year, but most would agree it is a possibility. If you plug in a 1% contraction instead the growth assumptions currently being used to calculate the 10 year deficit you come up with $16T deficit over ten years. Treasury leaks a story calling into question the competency of a rating agency that just downgraded their rating and it is taken seriously by the press. This says a lot about the press, Treasury and S&P, none of it flattering.
Jun '10
Re: So, the S&P Can Do Math But the Treasury Can't?
Maybe S&P took the CBO numbers and added on $2T increased borrowing costs that they anticipate will result from the downgrade? That would have left S&P defending their numbers on the rationale: We're downgrading the US because US interest expenditures are going to be high because we are going to downgrade them. The restatement accepting Treasury's numbers would be preferred to making that argument explicit.
Mar '11
Re: So, the S&P Can Do Math But the Treasury Can't?
S&P downgrades US credit rating. As expected.
Barney Frank leads democrats in buring their heads in the sand. As expected.
The Fed, meanwhile, is revising its projections. Downward. As expected.
May '10
Re: So, the S&P Can Do Math But the Treasury Can't?
Sadly 2 trillion is getting to be merely a rounding error when discussing the Leviathans spending.
Apr '11
Re: So, the S&P Can Do Math But the Treasury Can't?
I thought it was only the left who was intent on shooting this messenger.
"In short, S&P is just making stuff up" - Paul Krugman
"Pardon me for asking, but who gave Standard & Poor’s the authority to tell America how much debt it has to shed?" Robert Reich
"So let's get this straight: the Treasury department is kicking and screaming at S&P for daring to downgrade the US, when it is using as its baseline a forecast prepared by the same CBO which back in 2001 predicted a net negative debt balance by 2008 (!), and which in the same year expected 2011 US GDP to be $16.9 trillion, and a budget surplus of about $1 trillion, putting any S&P forecast from the peak of the credit bubble, to shame, but far more importantly...the S&P did not use a baseline that assumes a 5% GDP annual growth, when current annualized GDP, 2 years after the end of the recession, is under 2%? And this is what is supposed to make S&P less than credible? This is like the pot and the kettle having commenced global thermonuclear warfare."
Sep '10
Re: So, the S&P Can Do Math But the Treasury Can't?
Its so unlike this US Administration to lean on people to get favorable outcomes. I am shocked, shocked I tell you that S&P is not 100% objective and subject to pressure from a hostile government. Its a good thing they aren't headquartered in the same country as that government or I'd expect Acorn protests and possible federal government investigations.
Sep '10
Re: So, the S&P Can Do Math But the Treasury Can't?
I assume they were using a Microsoft spreadsheet, developed by friend of Warren Buffett Bill Gates's former software company.