Archive for April 21st, 2011

Obama Faces Heavy Lift in Downplaying U.S. Credit Warning

Thursday, April 21st, 2011

This is not a good thing at all. Coupled with gold at over $1,500 an ounce, the financial shape of our country is going from bad to worse.

President Obama is once again hitting the road, or perhaps the trail, to sell his financial prescription for the country. But a day after a leading agency put the U.S. government on notice that it was at risk of losing its sterling credit rating, the president faces a heavy lift in convincing voters that Washington is on track toward fixing its debt problem.

Standard & Poor’s Ratings Service sent shock waves through economic and political circles Monday when it lowered its outlook for U.S. debt from “stable” to “negative.” Though it kept U.S. credit ratings steady, the agency warned that political deadlock could compel it to downgrade Washington’s rating in just a couple years.

Anyone who has dealt with a less-than-stellar credit rating knows how that complicates their ability to obtain anything from a car loan to a mortgage. And while the White House downplays the S&P outlook, others say it should serve as a wake-up call for the country to get out of debt.

“No one can portray this as good news when a rating agency decides to go public with its reservations,” said Douglas Holtz-Eakin, former director of the Congressional Budget Office during the George W. Bush administration. He said not only does this pose a credit problem for the country, but it jeopardizes the ability of the United States to attract investment from job-creators.

“That’s not hard for people to understand,” he told FoxNews.com.

Obama and his team are working hard to play down the announcement and keep spirits high about the possibility of a meaningful deficit-reduction agreement. The president gave a talk about his budget vision Tuesday morning at a community college in northern Virginia, where he expressed confidence in the possibility of a deal.

“I believe that Democrats and Republicans can come together to get this done,” Obama said. He agreed that failing to address the crisis could do “serious damage’ to the economy, but said he’s “optimistic.”

The president, repeating the backstory he gave during last week’s budget address, blamed the deficit problem in large part on Bush-era tax cuts for top earners, the wars in Iraq and Afghanistan, and the Medicare prescription drug benefit, while defending the deficit-financed stimulus programs under his watch. He expressed the problem in everyday terms, saying, “Just like you, America has to start living within its means.”

The president also tried to rally support for his proposals, telling the audience: “I want everybody to be in the game.”

After Virginia, Obama plans to speak at the Facebook headquarters in California Wednesday and head next to Reno, Nev., on Thursday.

The S&P announcement was in large part a political judgment — the ratings agency based its assessment on the sentiment that a budget agreement addressing the country’s long-term deficit and debt problem might not be reached until after the 2012 election. The Obama administration claims the atmosphere for consensus is better than S&P predicts.

“We think that the political process will outperform S&P expectations,” White House Press Secretary Jay Carney said Monday. He said both parties agree on a long-term deficit-reduction target of about $4 trillion — Obama is looking to achieve that in 12 years, while Republicans are shooting for a little bit more than that in 10 years — and that they can find common ground on how to reach it.

“A statement that observes the fact that there is often gridlock in Washington and that the contentiousness between the two parties sometimes prevents us from getting things done is not one we would disagree with,” Carney said. “But the fact is … when the issues are important, history shows that both sides can come together and get things done. President Ronald Reagan did that with Tip O’Neill, Democratic speaker of the House. President Bill Clinton did it with Newt Gingrich, Republican speaker of the House. President Obama did it 10 days ago with John Boehner, Republican speaker of the House. We can do it again.”

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