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Just the Facts: S&P's $2 Trillion Mistake

suraj.sun (1348507) writes | about 3 years ago

Government 0

suraj.sun (1348507) writes "In a document provided to Treasury on Friday afternoon, Standard and Poor's (S&P) presented a judgment about the credit rating of the U.S. that was based on a $2 trillion mistake. After Treasury pointed out this error — a basic math error of significant consequence — S&P still chose to proceed with their flawed judgment by simply changing their principal rationale for their credit rating decision from an economic one to a political one.

S&P incorrectly added that same $2.1 trillion in deficit reduction to an entirely different oebaseline where discretionary funding levels grow with nominal GDP over the next 10 years. Relative to this alternative baseline, the Budget Control Act will save more than $4 trillion over ten years — or over $2 trillion more than S&P calculated.

S&P acknowledged this error ( http://online.wsj.com/article/SB10001424053111903366504576491421339802788.html?mod=WSJ_hp_LEFTTopStories ) — in private conversations with Treasury on Friday afternoon and then publicly early Saturday morning. In the interim, they chose to issue a downgrade of the US credit rating.

U.S. Dept of the Treasury: http://www.treasury.gov/connect/blog/Pages/Just-the-Facts-SPs-2-Trillion-Mistake.aspx"

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