Obama as Gerbil, Horse, or Spinmeister?

Do you wonder if Pres. Barack Obama feels like a gerbil running on an exercise wheel? He must feel frustrated that as he implements his wish list of social spending and entitlement programs, the markets are not cooperating with him.  

How will the Obama administration cut the U.S. deficit enough to pacify investors?

The Wall Street Journal reported Friday on Standard & Poor’s recent move:

“S&P changed its outlook for the U.K.’s credit rating to negative, meaning that a downgrade could come in the next couple of years.”

The possible downgrade for the U.K.’s credit rating is obviously bad news for the U.K., but investors also made the connection to the U.S. as U.S. Treasury prices declined yesterday. The market for credit-default swaps “is now pricing the U.S. government as riskier than France’s,” wrote Stephen Fidler and Neil Shah of the WSJ.

Interesting. This is exactly what I’ve been concerned about. As the U.S. debt climbs, it stands to reason the buyers of our debt will grow concerned, and demand a higher interest rate to hold what they perceive as a riskier debt. One of the ongoing concerns you may share with me is that Obama seems to act like a horse with blinders on — that is — he sees only what is in front of him, and nothing else. There are unintended consequences to actions, and it seems Obama and his team didn’t foresee the unintended consequences of running up the U.S. debt. Or maybe they just didn’t believe the market would dare to realistically price U.S. debt.

Bloomberg.com’s Robert Schmidt reports:

“Treasury Secretary Timothy Geithner committed to cutting the budget deficit as concern about deteriorating U.S. creditworthiness deepened, and ascribed a sell-off in Treasuries to prospects for an economic recovery.”

Wow. So now the White House is spinning the sell-off in Treasuries yesterday as a possible indicator for an economic recovery? And exactly what will you cut in the budget, Mr. Geithner, to significantly reduce the U.S. deficit?

What do you think of this most recent spin?

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