President Obama’s team of economic advisers is downplaying Standard & Poor’s negative outlook release Monday on the U.S. AAA credit rating, arguing that it’s more pessimistic about Washington’s ability to reduce the nation’s $14 trillion debt than it should be.
White House spokesman Jay Carney pointed out in a briefing with reporters that Moody’s, one of S&P’s competitors — gives the U.S. a “credit positive” rating
“We think the prospects are better — that the political process will outperform S&P’s expectations,” Carney told reporters Monday.
“I don’t think that we should make too much out of that,” top White House economist Austan Goolsbee said on MSNBC, referring to the S&P downgrade.
“What the S&P is doing is making a political judgment and it is one that we don’t agree with,” he said on CNBC.
Earlier in the day, Majority Leader Eric Cantor (R-VA) seized on the S&P’s decision to downgrade the nation’s credit rating as ammunition for Republicans’ argument that it would be better to hold out for more spending cuts when it comes time to increase the debt ceiling in the coming weeks and months.
“Today’s announcement makes clear that the debt limit increase proposed by the Obama Administration must be accompanied by meaningful fiscal reforms that immediately reduce federal spending and stop our nation from digging itself further into debt,” Cantor said, calling the S&P news a “wake-up call.”
S&P affirmed the U.S. federal government’s “AAA” rating but changed its long-term outlook to negative from stable, indicating that there’s at least a 33 percent chance that it will downgrade the country’s debt rating within two years.
The White House and Congress seem to be on another budget collision course as Republicans continue argue for the need to couple raising the debt ceiling with more budget cuts, and the President insisting on a clean, stand-alone debt-ceiling increase. Treasury Secretary Timothy Geithner has warned Congress that the debt ceiling must be raised by July if the country wants to avoid defaulting on its loans, which would lead to catastrophic global economic ripple effects and likely plunge the world into another recession.
In the last week, Obama in interviews has acknowledged that the debt ceiling won’t be raised without spending cuts, but Carney is continuing to press for a clean debt-ceiling measure and separate agreement on cutting long-term spending.
“These things can happen on parallel tracks, if you will,” Carney said. “Regardless on how that process proceeds, it’s absolutely a fact that congress will raise the debt ceiling–not to do that would be catastrophic folly.”
Obama will take his economic message on the road this week with speeches planned for three states important to his re-election bid. Obama heads to northern Virginia on Tuesday, Facebook headquarters in Palo Alto, California, on Wednesday and Reno, Nevada, on Thursday to field questions in townhall-style on the economy and his plan, unveiled last week, that would end Bush-era tax breaks for the wealthy and cut the deficit.
