In the wake of the bond warning issued by Standard & Poor’s yesterday, some have argued that the controversy helps Barack Obama in demanding adoption of his deficit-reduction plan. However, today’s report by the Washington Post shows that the White House itself disagreed, as it tried to convince S&P to stay silent on American debt. The new information gives ammunition to Republicans (via JWF):
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 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.
Obama’s plan certainly looks like a key component of that skepticism. What does it tell us that Treasury made the argument that the President’s “plan” would solve the problem, and that S&P still issued the warning? It sounds as if S&P doesn’t think much of the plan, nor of the White House’s ability to work with Congress to produce something more realistic.