Treasury

CHART OF THE DAY: S&P's $2 Trillion Error Explained

Brian Beutler | August 8, 2011, 12:20PM

President Barack Obama and Treasury Secretary Timothy Geithner

In the weeks leading up to last week's debt limit deal, the ratings agency Standard & Poors warned that they would downgrade the country's AAA bond rating if the White House and Congressional leaders couldn't reach a fiscal consolidation plan of at least $4 trillion over 10 years.

The Congressional Budget Office scored the deal they ultimately reached at just over $2 trillion and S&P, perhaps feeling locked into its threat, made good on it.

The implication, to borrow from the Vice President, is that $2 trillion worth of deficit spending over ten years is a BFD.

But as Treasury Department officials, including Secretary Tim Geithner, have been angrily pointing out since Friday night, S&P's original analytical justification for the downgrade included a $2 trillion error, exaggerating U.S. deficits over the same 10 year window.

Geithner himself said, "[t]hey've shown a stunning lack of knowledge about basic U.S. fiscal budget math. And I think they drew exactly the wrong conclusion from this budget agreement."

Most reports have simply alluded to the error without explaining it. But here, according to Treasury officials, is what actually happened.

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