Here’s the thing: S&P seems to want Washington to cut much faster than any of the plans currently circulating. As Goldman Sachs notes:
Here is what the Treasury Department has to say about S&P’s bomb:
“This morning, S&P affirmed the AAA rating of the U.S., but emphasized the importance of timely bipartisan cooperation and action on fiscal reform. In addition, Moody’s commented today that ‘we view the changed parameters of the debate, with broadly similar goals as to government debt levels, as a turning point that is positive for the long-term fiscal position of the U.S. federal government.’
Barclays bank offers its take on S&P. Here are some highlights (bold is mine):
1) A couple of hours ago, S&P put its long-term rating on U.S. sovereign debt on negative outlook. This means that it believes there is at least a 33% chance that it will lower the AAA long-term rating of the U.S. within two years.
The White House believes America’s debt problem is an important issue, but not an urgent one. Bond rating firm S&P seems to think differently:
Talk about fuzzy math. President Obama claims higher taxes will account for a mere third — $1 trillion — of his proposed $3 trillion debt reduction over 12 years, not counting less interest expense. Wrong. The actual number is probably around 50 percent of $4 trillion in savings — some $2 trillion — and could be closer to 60 percent. (More details below.) Instead of offering a template for a Grand Compromise, Obama seems to have created a Grand Obfuscation.
Sarah Palin rides to the sound of the guns. It was a chilly, wet and blustery afternoon in Madison, Wisconsin — one more appropriate for a late-season Packers game than a springtime political rally. The stirring NFL Films theme, “The Classic Battle,” would’ve been a more apt musical choice than Van Halen’s “Right Now” to accompany Palin as she entered the stage outside the state capital building to address thousands of Tea Party members, along with a good number of extremely hostile, expletive-hurling government union rowdies.
So the House just passed Paul Ryan’s highly-detailed “Path to Prosperity” Plan. It almost immediately achieves primary balance and reduces debt as a share of the economy. It balances the budget in the 2030s and eliminates outstanding debt in the 2050s by cutting and restructuring government healthcare spending. And it does all this without raising taxes while also lowering tax rates on companies and investors, both big and small. Even more impressive, the plan uses the slow-growth economic assumptions of the Congressional Budget Office, which, by the way, has scored the lengthy fiscal blueprint.
Gallup has Obama’s approval ratings down to 41 percent (with 50 percent disapproving) and just 35 percent among independents. Ratings like this put an incumbent president deep in the red as far as reelection. They just don’t get reelected with ratings under 48 percent — and only a 1/3 chance with a rating of 45 percent.