John Taylor reckons that S&P didn’t make a US$2tn math error. Rather, they just used a baseline scenario for spending that is different from the administration’s budget.
This might seem like semantics, however Taylor points out the the CBO has used the same baseline at times, as it is more in keeping with the track record of various administrations. There is some sense to this – aspiration is easy, it is actions that count.
According to the CBO, this track record yields the above trajectory for debt. Thus, if history is a guide, it seems safe to say that the move to AA+ is not going to be the last US ratings downgrade.
Tough decisions are needed, and the recent debt ceiling fiasco suggests that the present leadership doesn’t have what it takes to make those decisions.