[Updated at 9:44 p.m. ET] Referring to the Obama administration's contention that Standard & Poor's analysis of the government's finances was off by about $2 trillion, a Treasury Department spokesperson said: "A judgment flawed by a $2 trillion error speaks for itself."
The Standard & Poor's rating agency announced Friday evening that it has downgraded the U.S. credit rating to AA+ from its top rank of AAA.
On Friday afternoon, hours before S&P publicly announced the downgrade, the agency revealed its plans to the Obama administration and sent an analysis to the Treasury Department. The senior administration official said the analysis inflated U.S. deficits by $2 trillion.
Treasury analysts contacted S&P and challenged the analysis, and S&P acknowledged the mistake, the official said. But S&P said it still would stick with its decision to downgrade the United States' credit rating, according to the official.
"This is a facts-be-damned decision," the senior official said. "Their analysis was way off, but they wouldn't budge."
The official the administration can do nothing now but hope that S&P's decision and analysis faces outside scrutiny.
"These guys make Congress look good," the official said of S&P.
[Updated at 8:59 p.m. ET] Credit rating agency Standard & Poor's on Friday downgraded the credit rating of the United States, stripping the world's largest economy of its prized AAA status.
In July, S&P placed the United States' rating on "CreditWatch with negative implications" as the debt ceiling debate devolved into partisan bickering.
To avoid a downgrade, S&P said the United States needed to not only raise the debt ceiling, but also develop a "credible" plan to tackle the nation's long-term debt.
In its report Friday, S&P ruled that the U.S. fell short: "The downgrade reflects our opinion that the ... plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics."
S&P also cited dysfunctional policymaking in Washington as a factor in the downgrade. "The effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges."
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[Initial post, 7:15 p.m.] The Standard & Poor's rating agency served the Obama administration with notice Friday afternoon that it planned to downgrade the U.S. government's AAA credit rating, an administration official told CNN.
But S&P has yet to make its ruling public, and the source told CNN the agency is reconsidering after the administration challenged S&P's analysis of the government's finances.
The source, a senior official involved in the discussions, said the agency was off by "trillions" in its economic model and was now working to revise its analysis.
S&P did not return repeated calls for comment.
The official described the talks as a "moving target" and said "it's clear some people there still want to go forward" and downgrade U.S. debt.
Rumors swirled for most of the day Friday that S&P was preparing to make its move. But even several hours after the market close, official notice had yet to materialize.
Thanks Obama and all you liberals.
No, thank you Bush and all you republicans.
How is this Obama's fault? It is GOP's politicking that got us into this mess. Don't raise the taxes for the wealthy? Don't touch the defense budget? Don't pull out our troops from Iraq and Afghanistan? Really? You still think it's Obama's fault? Good for you sir...
Not since " 1917 ", when the Rating was set up. My God. AA+ is alright, but, does have major Issues, and if we sink lower, WOW. President Obama is NOT TO BLAME , the GOP Is. If Mccain Won 2008, or if Bush was still in office, thsi still would have happened. I hope you all enjoy $ 15.00 for a Carton of Eggs, that used to cost $ 3.67. My God.
Excellent... just the tap on the back (kick in the teeth to some) we needed. Look out below more downgrades to follow in the future from Fitch and Moody's. Next year's budget is $3.8T with $1.5T expected to be borrowed. We can't go on like this...
So, does this also mean that continuing the Bush tax cuts for the wealthy has not created more jobs? I thought that was the mantra when the tax cuts were extended. Instead there are fewer jobs. And now we hear some reports that banks are going to start charging customers with large accounts for keeping their cash in the bank. Seems there is too much money on deposit.
Could this mean that those with money are actually hoarding what they don't pay in taxes instead of creating jobs with it? And of course, since tax revenues are lower (in part because of these same tax cuts), federal spending is cut and government (at all levels, not just federal) is cutting jobs, pushing unemployment even higher. Less money in the hands of consumers means less demand overall, pushing unemployment even higher.
Tell me again, please, how and when those continued Bush era tax cuts for the wealthy are going to improve the economy.
Funny how so many of you are quick to blame the Repubs or teaparty. If the Dems had their way they would've just jacked up taxes, raised the ceiling a while ago and kill the economy even quicker, and we'd still get downgraded.
Oh but wait, the economy is getting better... really, just give it more time. Let the "stimulus" work. Yeah, thats it.
See how that goes on Mon when the stock market crashes and interest rates go up and we go into a depression.
Your post is straight from FOX "News"
Be optimistic for once!
We complained about the inaction of the ratings agencies pre-GFC, and now we complain when they take action. We are heading into a storm, and it is about time we accept this fact start preparing for it.
President Obama wanted a $4 trillion plan. S&P wanted a $4 trillion plan. The GOP objected and offered their $2 something trillion plan. And here we are.
Right – and he wanted revenue what all economists wanted. Screw the damn tea party!! A fridge (yes fridge despite what they'll say) Ignorant bunch of loud mouths should not dictate the course of the entire country.
LOL. Obama added $4 TRILLION to our debt in under 3 years. It took Bush 8 years to do that.
The GOP objected because it was NOT ENOUGH cutting.
Could we have picked a more in-effective leader? Market down, jobs down, borrowing up, Stanford U. said 100% of Obama's rescue package did 0 to impact the economy, America is more divided than ever, Health Care package expected to cost 1 Trillion more than published
We need REAL leadership NOW.
No. What we need is for people to realize Republicans got us into this mess and vote them out of office. I know Fox doesn't tell you that, and the truth hurts. But there it is.
If PRESIDENT Obama is useless-then who do suggest replace him" Palin? Bachmann? Romney? Better come up with better canidates, The ones mentioned and the other gadflies will not defeat him
Well the Republican controlled Congress is doing a fine job-The T-Baggers would rather push our car over the cliff and sacrifice our econmic stability than allow President Obama anything-They are the modern day Brown Shirts and in the next election we'll see just how popular their policies are with the American people.
AIG was one of the few insurance companies with a solid AAA ratings.
Just think, 10,000 years from now no one will remember how Obama borrowed us out of debt.
and no one will remember Bush and Ronnie spending us into it
thanks tea party that debt you scared all Americans with the one our grandchildren will be paying on??? well thanks for upping the interest on those payments and saddling them with even more debt.....geniuses!!!
Thanks Tea Baggers! Sorry the FAA thing didn't work out and you didn't get a air disaster to try and blame on the President - but there's always next time! (And we all know there will be a next time - unless people wake up and vote you - and every republican - out of office!)
The US just bailed out all the banks, auto companies, etc. so our credit is downgraded by S&P. Wow! That TeaPotty is really helping America out. Could I be more sarcastic. You will be remembered when election time comes around again. I hope!
Spending is out of control. Clinton had a balanced budget. Bush ruined it and spent crazy money. Obama took Bush's spending and put it on steroids. Ths US is Bankrupt and we will finally see the consequences of poor fiscal policy.
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