Ahead of its downgrade of the U.S.’s AAA rating Friday night, Standard & Poor’s sent a draft press release - obtained by POLITICO - to the Treasury Department that afternoon that included several numerical errors, setting off a heated back-and-forth as officials tried to correct the credit firm’s work.
The draft press release, according to POLITICO’s Morning Money, included projections that overestimated U.S. debt by $2 trillion. The initial projections were the general government debt-to-gross domestic product ratio would rise to 81 percent in 2015 and 93 percent by 2021.
In the final release, those numbers were revised down to 79 percent and 85 percent, respectively. Treasury officials noted that the corrected numbers put U.S. debt in line with other AAA-rated nations, including the United Kingdom and France, arguing that the U.S. ratio won’t reach France’s level for a decade.
The draft release had a bullet point about the debt-to-GDP ratio near the top of its release, but, with less grim numbers, pushed it lower in the final version that was released to the public, leading with concerns that “the effectiveness stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenge.”
In an interview with NBC that aired Sunday night, Treasury Secretary Timothy Geithner blasted the decisions made by Standard & Poor’s.
“I think S&P has shown really terrible judgment,” he said. “They have handled themselves very poorly and have showed a stunning lack of knowledge about basic U.S. fiscal budget math. And I think they drew exactly the wrong conclusion.”
The draft release said: “Even if the government fully implements [the debt ceiling] agreement, we project that the U.S.’s net public debt burden will continue to grow through the middle of the decade-and potentially beyond. Under our base case scenario, U.S. net public debt rises from 74% of GDP to 81% in 2015, and 93% by 2021. By contrast, for ‘AAA’ sovereigns we view as key peers of the U.S. - Canada, France, Germany, and the U.K. - we project their net public debt burdens to decline by, or even before, 2015.”
In the final release, it became: “Under our revised base case fiscal scenario—which we consider to be consistent with a ‘AA ’ long-term rating and a negative outlook—we now project that net general government debt would rise from an estimated 74% of GDP by the end of 2011 to 79% in 2015 and 85% by 2021.”
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