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S&P's $2 Trillion Math Mistake 1040

Posted by CmdrTaco
from the show-your-work dept.
Last friday Moody's S&P announced that they had downgraded the U.S.'s credit rating (leading to a pretty huge discussion on Slashdot I might add). Since then more interesting news has come out, suraj.sun writes "In a document provided to Treasury on Friday afternoon, Standard and Poor's (S&P) presented a judgment about the credit rating of the U.S. that was based on a $2 trillion mistake. After Treasury pointed out this error — a basic math error of significant consequence — S&P still chose to proceed with their flawed judgment by simply changing their principal rationale for their credit rating decision from an economic one to a political one. S&P incorrectly added that same $2.1 trillion in deficit reduction to an entirely different baseline where discretionary funding levels grow with nominal GDP over the next 10 years. Relative to this alternative baseline, the Budget Control Act will save more than $4 trillion over ten years — or over $2 trillion more than S&P calculated. S&P acknowledged this error — in private conversations with Treasury on Friday afternoon and then publicly early Saturday morning. In the interim, they chose to issue a downgrade of the U.S. credit rating."
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S&P's $2 Trillion Math Mistake

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  • by Sponge Bath (413667) on Monday August 08, 2011 @09:20AM (#37021152)
    Fonzi rates US debt "Aaaaa..." and gives it a thumbs up.
  • by GrahamCox (741991) on Monday August 08, 2011 @09:49AM (#37021386) Homepage
    The new standard: we're all poor.
  • by jmorris42 (1458) * <jmorris@bea u . org> on Monday August 08, 2011 @11:06AM (#37022476)

    > ...but only half of them refuse to tax the rich.

    Yes, because we understand a few things you obviously do not.

    1. Our problem is spending. Our percentage of GDP that government at all levels is spending is up near WWII levels. If the economy could be restarted that would improve slightly but still remain at historic highs. So the problem is spending, giving Washington more revenue would simple cause them to do what they have done in the past each and every time a grand compromise mixing cuts and revenue was made. The revenue increases (taxes) go in instantly and the cuts are promised for the 'out years' and never actually happen. You guys only get to pull that Lucy & the Football crap so many time before we wise up. We ain't Charlie Brown. So here is a grand bargain I'd make. Offer up three hundred billion of real cuts to NEXT YEAR's budget and I'd support raising taxes a hundred billion NEXT YEAR. And anyway, any time Washington talks about 'cuts' they are anything but. Something called 'baseline budgeting' says they 'assume' about 8% annual growth in each and every program and then when they only grow one 5% it is a 'drastic cut.'

    2. It wouldn't work: Laffer Curve. We are on the wrong side of it where tax cuts increase GDP and thus revenue and tax increases tend to depress GDP and thus revenue. Please blather on about taxing the rich for purposes of 'social justice' if it makes you feel better but STFU about increasing taxes to raise revenue. But if you have the balls (like Obama in one of the debates) to publicly state that you favor raising taxes anyway, knowing it will deepen the recession, we will feel free to laugh in your face, even it it hurts yer widdle self esteem.

If A = B and B = C, then A = C, except where void or prohibited by law. -- Roy Santoro

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