Despite attempts by Treasury Secretary Timothy Geithner and White House economic aide Austan Goolsbee to shrug off Standard and Poor's’ controversial downgrade of the U.S. economic outlook, the Obama administration privately urged Standard & Poor’s in recent weeks not to lower its outlook on the United States, according to The Washington Post.
The Post reported Tuesday that two people familiar with the matter said Treasury Department officials had been discussing with S&P whether the ratings agency should change its outlook on the United States to “negative” from “stable,” an indication that the country could lose its crucial AAA rating in coming years over its soaring debt levels.
According to the paper, 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.
The private conversation played out publically on Monday when Assistant Treasury Secretary Mary Miller criticized the rating’s service, and her statement contained many of the same arguments made to S&P analysts.
“We believe S&P’s negative outlook underestimates the ability of America’s leaders to come together to address the difficult fiscal challenges facing the nation,” Miller said in her statement. “As the President said last week, addressing the current fiscal situation is well within our capacity as a country. He has initiated a bipartisan process that will allow us to make progress on a balanced approach to restoring fiscal responsibility. ”
Goolsbee also attempted to downplay the S&P’s move in an interview with Bloomberg Television, calling it a “political judgment” that he believes is“not right.”
Despite the administration’s pleas, The Post reports 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.
As the paper notes, it is not uncommon for companies and governments to push back when they don’t agree with a decision made by a credit ratings agency. Sometimes, companies that issue debt — which also pay for the ratings — will shop around for the best rating.
But the U.S. government is an unusual case—it doesn’t solicit ratings. S&P and the other major credit rating agencies offer their judgments notwithstanding.