S&P Warns U.S. of Further Downgrades in Credit Rating

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On Friday, for the first time in American history, Standard & Poors (S&P) lowered its credit rating on the U.S. Treasury from AAA to AA+ while keeping the outlook at “negative.”
Amidst angry criticisms from Obama administration officials at the White House and Treasury — that S.& P.’s action was based on faulty budget accounting that discounted the just-enacted deal for increasing the debt limit — S&P not only gave a full-throated defense of its decision but warned that further downgrades may lie ahead. U.S.’s rating may be further cut to AA within two years if general government debt gets even higher.
This means that the United States now is fallen behind these countries that are rated AAA by S&P:

  • Australia
  • Austria
  • Canada
  • Denmark
  • Finland
  • France
  • Germany
  • Guernsey
  • Hong Kong
  • Isle of Man
  • Lichtenstein
  • Netherlands
  • Norway
  • Singapore
  • Sweden
  • Switzerland
  • United Kingdom

Here is the Full Text of the S&P Statement:
“We have lowered our long-term sovereign credit rating on the United States of America to ‘AA+’ from ‘AAA’ and affirmed the ‘A-1+’ short-term rating.
We have also removed both the short- and long-term ratings from CreditWatch negative.
The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.
More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.
Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government’s debt dynamics any time soon.
The outlook on the long-term rating is negative. We could lower the long-term rating to ‘AA’ within the next two years if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures during the period result in a higher general government debt trajectory than we currently assume in our base case.”

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0 responses to “S&P Warns U.S. of Further Downgrades in Credit Rating

  1. Clearly not Bush’s fault.

  2. lowtechgrannie

    There are whole departments in the federal government that are extra-constitutional that could be completely eliminated or significantly downs-sized. I don’t think any of them have been on the table in the budget talks. Compliance with all the “Sustainability” mandates of Agenda 21 is tremendously expensive.

    • Yes, we really don’t need a 1. Department of Education, let alone 2. Have the current admin double it’s budget for no reason (beside supporter rewarding) as part of the big spending binge since ’08.

  3. You can blame the Teabaggers for this one.

    • I prefer to blame the stinking statist commie pukes (that would be democrats and RINOs), who are deliberately spending this country into oblivion.

    • Ah, because liberals (i.e., you) feel like it! Of course, it’s a certain Democratic president’s policies’ doing, but why let reality intrude?

    • And I blame your parents for bringing an idiot like you into this world!

    • Ha Ha Ha Ha Ha!
      Thanks for the laughs, Arliss! The astounding empirical and logical leaps you made convince me that liberals/socialists/ commies (same difference) truly are lacking in grey matter (translated for you: it means you’re stupid). Must be the dope you smoked or the brainwashing in public schools.

  4. John Chambers, the chairman of Standard & Poor’s sovereign debt ratings, on Sunday estimated that it could take between 9 and 18 years for the nation to regain its AAA credit rating.

  5. I’m glad at this juncture that our Prime Minister is an Economist with a majority Conservative government.
    [Kel is Canadian. ~Eowyn]

    • Being a Canadian might explain the thumbs down on my post, Eowyn 🙂
      But, what really saved our bacon was the introduction of the GST (Goods and Services Tax) years back by PM Conservative Brian Mulroney – it bulked up the coffers for events such as this. (We were downgraded to AA+ in 1992, thus the introduction).
      There was some howling, but a “few pennies more” on our retail sales slips didn’t break even those in the lowest economic bracket and we didn’t have to disproportionately raise corporate taxes.

      • I apologize for the rude thumbs down, Kel.
        Americans should be heartened by your comment. Before your last election, your government was in the hands of liberals. Which means that there is hope for America — so long as we put a conservative in the White House and a conservative majority in both houses of Congress in 2012!
        Peace. 🙂

        • Oh, Eowyn – it was getting bad under the Liberals! Former Liberal PM Paul Martin “balanced the budget,” but he took monies from the Employment Insurance, the Retirement Insurance, and put them in the general coffers.
          Can you imagine retiring, but finding out the monies you contributed weren’t there? Slowly but surely, PM Harper is replacing them without killing us!


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