It was quick thinking by a little-known Treasury functionary that nearly saved the U.S. credit rating on Friday—but didn’t quite, according to David Graham.
After Standard and Poor's informed the government of its intention to downgrade the national rating from a pristine AAA to AA+, Treasury officials in Washington huddled to look over the ratings agency’s draft press release. It was reportedly John Bellows who noticed within minutes that S&P had made a glaring error that placed its calculations about the U.S. deficit off by about $2.1 trillion.
Treasury Secretary Tim Geithner quickly pushed back at S&P, pointing to the error. The agency acknowledged its mistake, then said it was charging ahead with the ratings change anyway. Later that evening, it officially downgraded American debt.
The mistake itself is enough to make any non-budget expert’s head ache. The short version is that S&P miscalculated the share of GDP that public debt would reach by 2021 by using the wrong assumption, or “baseline” about budgetary matters. The correct projection, as calculated by the nonpartisan Congressional Budget Office, would produce a difference of $2.1 trillion less in debt. S&P responded that, in essence, it didn’t matter—the number was large enough to merit the downgrade, especially given the political paralysis that has gripped Washington….
Read more at http://www.thedailybeast.com/articles/2011/08/07/john-bellows-treasury-man-who-caught-s-p-s-2-trillion-debt-downgrade-error.html
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