Maggie's Farm

Criticism of S&P for making a $2T "mistake" in projecting the US indebtedness 10 years from today, in 2021, is completely unwarranted. The CBO figures, which the Treasury Dept. cited, are no more "accurate" than are S&P's estimates. In scoring the debt ceiling agreement, the CBO projected the US indebtedness would be $22T in 2021; S&P scored the same bill and came up with a figure of $20T. That's a difference of 10%. The difference is minor, and in no way alters the worrisome fact that according to both analyses the US debt is projected to rise by almost 50% over the coming decade.

As the official S&P statement mentioned, even more troubling are the signs that the Administration and Congress lack the political will to abide by the so-called triggers in the debt ceiling agreement. In the past, neither one has shown the discipline to curtail out-of-control spending on the major social programs like Medicare that are driving the annual budget deficits (a good example I can cite is the yearly suspension of earlier legislation that Congress enacted, which called for reductions in the level of Medicare reimbursements to hospitals and physicians). If this sort of past history is a guide, the US debt in 2021 will likely exceed either estimate by the CBO or S&P, and by a wide margin. The difference of $2T will be nothing compared to the likely error when we look back from 2021 at these theoretical projections that people are squabbling over today. Neither figure is a "real number" and neither one is likely to be any more reliable than the other one.

As for the credibility of the CBO, it might be useful to see how well their previous projections have turned out. Another blogger has reminded people that in 2001 the CBO projected a US indebtedness in 2011 of MINUS $2.5T, meaning that according to the CBO, by this very year the US would have eliminated all of its accumulated debt and gone into the black by an astonishing $2.5T. Today, the actual debt stands at $14T. Accordingly, the entirely fallible CBO's estimate in 2001 was in error by $16T ! The magnitude of that enormous misjudgment by the CBO makes a $2T difference of opinion about the projected size of the 2021 US debt pale in comparison.

Sorry, I mistyped the numbers and got them backwards in paragraph 1: the CBO projection for 2021 was $20T, the S&P projection was the $22T figure.

There's a world of difference between France and the US. France is not so large that it can't be bailed out by the European central banks. It might be a struggle, but it probably can be done. On the other hand, as the largest economy in the world, the US economy is too big to be bailed out by anyone. When France gets a cold, no one else sneezes; when Uncle Sam gets a cold, the rest of the world gets pneumonia. In any case, France is likely to be downgraded in the near future. When that happens, will you be writing that S&P was just getting revenge for some bad fromage or for a bad shipment of Bordeaux?

You say S&P is getting revenge. I say it is doing the job it is supposed to do...and which people like you criticize it for NOT doing in the years leading up to the collapse of the economy in 2008. You say, What goes around, comes around. I say that deficit spending in the US has reached reckless levels which threaten to destabilize the entire world's economy, and that S&P has now done what needed to be done. In my opinion, S&P did not go far enough. The US deserves to be downgraded another notch. That will come soon enough, fortunately well before Obama and the Dems succeed in their goal to turn us into a pauper state like Greece.