White House Scorns S&P Downgrade
JOHN YDSTIE, Host:
This is WEEKEND EDITION from NPR News. I'm John Ydstie.
President Barack Obama had barely signed that bill raising the debt ceiling this past week when bad economic news began to mount. Wall Street and markets around the world were not impressed with the plan Congress approved to reduce the nation's budget deficits. The financial markets turned sharply negative on Thursday, sparking a selloff. And then on Friday, the Standard & Poor's credit rated agency downgraded the U.S. credit rating from Triple-A to AA-plus, the first such downgrade in U.S. history.
In a moment, and we'll hear how countries overseas are reacting to the news. But joining us now is NPR national political correspondent Don Gonyea. Hi, Don.
DON GONYEA: Hey. Good morning, John.
YDSTIE: Don, there was some push-back from the White House and Department of Treasury about this decision. They said S&P's analysis was flawed and based on math errors.
GONYEA: That's right. And the initial statement we got from the Treasury was not attributable to anyone in particular. It was on background from a Treasury spokesperson and it was this: a judgment flawed by a two trillion dollar error speaks for itself. So the first react from the White House was to just push back against the action that Standard & Poor's has taken.
So that was the Obama administration's response on background, but what was the official reaction?
Well, we yesterday got an official statement from the press secretary, from Jay Carney, and it too was pretty short, a bit longer, though. It starts with, quote, "The president believes it is important that our elected leaders come together to strengthen our economy and put our nation on a stronger fiscal footing. Yet the path to getting there took too long and it was at times too divisive."
So that statement in the way it starts implies that what Standard & Poor's was reacting to was kind of the nature of the debate and the inability to really kind of solve this issue in a tidy fashion. But then the statement goes on - and this is really the key line. Carney says we must do better to make clear our nation's will capacity and commitment to work together to tackle our major fiscal challenges. Then he says over the past weeks and months the president repeatedly called for substantial deficit deduction to both long-term entitlement changes and revenues, through tax reform, with additional measures to spark jobs and strengthen our recovery. That is why the president pushed for a grand bargain that would include all these elements.
So the White House is putting a lot of it on the Republicans in Congress, saying, look, we were pushing for the kind of bigger deal that might have satisfied Standard & Poor's.
So, Don, how does this news change the political landscape and the mood for GOP presidential candidates?
YDSTIE: Well, welcome to this week's storyline on the campaign trail. And it is a big week on the campaign trail. This is - let's call it Iowa week. On Thursday night there's a candidates debate in Des Moines. The Iowa State Fair, which is a huge event in pre-caucus years, starts on Thursday as well. And then it all builds up to Saturday's Ames straw poll, which is the first real test for the candidates.
GONYEA: There's been widespread condemnation by the Republican hopefuls of President Obama as having brought this on himself. Just here's just a sampling of reaction from Mitt Romney: Americans' credit worthiness just became the latest casualty in President Obamas failed record of leadership on the economy. Michele Bachmann says: President Obama is destroying the foundations of the U.S. economy, one beam at a time. And she calls for Treasury Secretary Timothy Geithner to step down. That's just a sampling, but a representative sampling, so this becomes the storyline of not just the next week, but the months ahead on the trail.
YDSTIE: So Don, I imagine there's a bit of a sense of foreboding in the White House ahead of the market openings around the world tonight and tomorrow?
GONYEA: They are watching things very closely. What they're doing is there trying to portray Standard & Poor's decision, the downgrade, as an outlier, noting that Moody's and the Fitch rating services haven't issued a downgrade. The White House says the lack of action by other ratings agencies does show that the collective judgment is that the U.S. is still very creditworthy.
YDSTIE: NPR's national political correspondent Don Gonyea. Thanks very much, Don.
GONYEA: Thank you.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.