Obama Administration Lobbied Standard & Poor’s Not To Lower Debt Outlook
Standard & Poor's didn't believe the Obama Administration's argument that Washington would be able to fix the deficit. There's no reason they should have.
As I noted earlier this week, Standard & Poor’s lowered it’s outlook for U.S. Government debt to “negative” based largely on the political mess surrounding the budget in Washington and the seeming in ability of either side to be able to come to an agreement on how to fix the deficit problem. Today, The Washington Post reports that the Obama White House tried to convince S&P not to change their outlook:
The Obama administration privately urged Standard & Poor’s in recent weeks not to lower its outlook on the United States — a suggestion the ratings agency ignored Monday, two people familiar with the matter said.
Treasury Department officials had been discussing with S&P whether the ratings agency should change its outlook on the United States to “negative” from “stable,” an indication that the country could lose its crucial AAA rating in coming years over its soaring debt levels.
Treasury officials told S&P analysts that they were underestimating the ability of politicians in Washington to fashion a compromise to curb deficits, a Treasury official said. They argued a change in ratings was not needed at this time because the debt was manageable and the administration had a viable plan in the works, the official said.
But S&P analysts told Treasury officials on Friday that they were unmoved — and released a report that expressed skepticism that the political parties could come together on how to bring spending in line with revenue.
Obviously, the analysts weren’t impressed with the Administration’s “plan,” the details of which have yet to actually be released, and they had good reason to be skeptical.
Additionally, it’s pretty clear that the Administration’s argument that politicians in Washington could come together and fashion a compromise was just a lot of hot air:
The White House’s proposed deficit talks with Congress appear to be unraveling before they’ve even begun.
House and Senate Republican leaders announced Tuesday that their sole appointees to the May 5th meeting would be House Majority Leader Eric Cantor (R-Va.) and Senate Minority Whip Jon Kyl (R-Ariz.)–neither of whom are budget leaders and both of whom function largely as political mouthpieces for their party. GOP leaders also each opted to send only one appointee, instead of the requested four, to the meeting.
“I remain skeptical that the administration will take this effort seriously, especially after it all but ignored its previous debt commission and President Obama had to be dragged kicking and screaming to consider minimal spending cuts for the rest of this fiscal year,” Cantor said in a statement.
“A serious effort to get our fiscal house in order is sorely needed, however, which is why I believe this commission should commence with a clearly defined target and purpose, under a time frame to produce that result — so that it doesn’t end up in the graveyard of previous commissions that failed to improve our nation’s finances.”
At the same time, some Democratic sources said their own party’s picks for the meeting aren’t as credible as they could be. Senate Majority Leader Harry Reid (D-Nev.) and House Minority Leader Nancy Pelosi (D-Calif.) only named a total of four appointees instead of eight: Senate Finance Chairman Max Baucus (D-Mont.), Senate Appropriations Chairman Daniel Inouye (D-Hawaii), House Budget ranking member Chris Van Hollen (D-Md.) and Assistant Democratic House Leader James Clyburn (D-S.C.). But it’s not the numbers that are the problem.
Pelosi’s picks for the talks make the meeting “look silly” because Van Hollen and Clyburn “are just going to do what Pelosi wants, and she’s not interested in compromise,” said a senior Democratic aide. “The picks for this task force all reflect a lack of seriousness.”
This isn’t really a surprise at all. Despite all the pronouncements over the past month or so about how Congress was not going to “get serious” about the deficit, the reality of the situation is that it’s a virtual impossibility that any kind of real reform is going to happen any time before the 2012 elections. Democrats are not going to agree to entitlement reform, and think they have a winning political issue for 2012 over tax cuts for “the rich.” Republicans are not going to agree to tax increases, and still seem to think that the 2010 midterms gave them some kind of mandate for massive budgetary reform even though that clearly isn’t the case. What we’ll see in Washington over the next year or so is more about maneuvering for 2012 than it is about actually doing anything to fix the mess that we’re in. No wonder Standard & Poor’s didn’t listen to the Administrations exhortations.
I think it’s possible there is some political motivation in the S&P warning. I mean, imagine if they had a Drew or two on their panel.
But that said, it’s no big. The S&P waring, per their past performance, trails what we all know. It is hardly a surprise. That’s why the economic community and markets have largely taken it as a snore.
I guess that they should have just paid off S&P like Wall Street did.
I’m sure this had nothing to do with S&P being investigated by the government for rating crappy sub prime bonds AAA and causing the global economic meltdown.
Doug,
“…Democrats are not going to agree to entitlement reform…”
The ACA found $500B in Medicare waste. They were demagogued by the so-called republicans. Ryans Tea Party Manifesto now claims those savings. (The democrats use the money to close the donut hole left by 43. Ryan wants to give the money to the wealthiest tax payers.)
In addition by addressing health care costs, the root of Medicares problems, the Medicare system is made more stable.
You are right – if you think reform consists of abolishing Medicare – which is what Ryans plan does.
If you think reform includes working within the existing system (a conservative tenant) then the democrats have already started.
$6/gallon gas? Maybe Obama can ask the gas stations not to post the price.
http://www.cnbc.com/id/42683030
You forget jwest, we Obama voters have our Prius!
hey norm,
the medicare system is not more stable… its only more stable if you take the admins repeated double counting false claims. They try to take that 500 billion and claim that it is makign medicare more stable while at teh same time using that same 500 billiont o pay for the subsides. So either it makes medicare more stable but increases the general fund budget deficit by a ton, or it doesnt cause a deficit and doesn nothing for medicare – if anything it makes it worse because they are acceserbating the doc reimbursement problem. Most fo that 500 billion was not a cut of “waste”, it was just promising the same benifits to future seniors while saying you are going to pay doctors less for the same thing. Thats nothing but a price control and will cause shortages. Its why we keep passing doc fixes every year.
oh ya, thanks for ******* me out of an affordable used car(blows kisses)…
Ponce, I’m sure that that had *nothing* do to with it.
“That’s why the economic community and markets have largely taken it as a snore.”
As has been pointed out, the debt markets treated it as a nada.
Doug – Perhaps you were busy or something, but you really should have a friend tell you about the events of the early 21st century, and the role of the ratings agencies.
And have them do this *before* you open up your IRA/401(k) statements. I’m afraid that you’ve taken a slight hit since 1999.
What does it take for some people to understand the country is borrowing 40 cents of every dollar spent? It cannot go on. When you have to borrow money to pay back the money you borrowed. someone is going to call a halt to the whole mess. This issue just proves how ignorant progressives are. You are either out to bankrupt the nation, for whatever reason, or you have not economic skills what so ever. If you plan to try to install a socialist type government when this one fails you will find armed tea party people standing in your way in numbers you cannot imagine.
I’m just amazed this news has been taken at face value by so many people, given a) the significant protections S&P and the other ratings agencies receive from the government, and b) their complicity in wrecking the economy (and thus accelerating the deficit problem).
Tell me something: Why does any body listen to anything S&P has to say anymore? Why?
Aren’t these the same conartists who were TOTALLY impressed with the CDO’s issued by Goldman Sachs in spite of the fact that, “they had good reason to be skeptical”????
Doug, you may have a point about the likelihood of the Dems and the GOP reaching an agreement, but citing S&P puts you in the catagoury of “Stupid”. (or “Naive” if that suits you better)
How many armed Tea Partiers, Zels? As many as the 300 who turned out to hear Michelle Bachmann on “tax day”?
No WR…the 70% of TP’ers who don’t want Medicare touched, much less abolished.
Image what all of those saying that S&P is meaning and irrelevant would be saying if they had published the same report during the Bush Administration. Maybe one of the problems with politics is that all of the partisans have adopted a “shoot the messenger” mentality and just will not tolerate bad news.
Also, I wonder if S&P is accounting for the temptation to just inflate the debt away by the coming one party state and are anticipating the problems that a one party state will have on inflation, taxes, government spending, and debt will be.
John,
If things keep going like this, Prius owners may comprise the total of Obama voters in 2012.
Come on jwest, don’t expect us to believe you’d even know.
Venn diagram:
(jwest reality) (obama voters)
“What we’ll see in Washington over the next year or so is more about maneuvering for 2012 than it is about actually doing anything to fix the mess that we’re in.”
That seems to be true, but I think it would be a terrible misreading of the situation to think that Obama is simply maneuvering for 2012. He’s got a job to do now, and it’s not only in his interests to do it well, it’s in our interest too.
The Republicans have the opposite problem. It’s in their interest for Obama to do poorly. This is why 9% unemployment is “good news” for Republicans (although in truth, that’s “good news” for nobody).
We’ll see if they can turn that around by 2012. I think there might be a few months, depending on who the GOP puts forth, where Republicans will start rooting for America again. They might stop taking signs of economic doom as signs of political fortune. Or…they might not.
superdestroyer says:
“Image what all of those saying that S&P is meaning and irrelevant would be saying if they had published the same report during the Bush Administration. Maybe one of the problems with politics is that all of the partisans have adopted a “shoot the messenger” mentality and just will not tolerate bad news. ”
Which, please note, they ***********************did not****************** do. They issued lies for money.