Who are better suited to repair America's credit rating that was dropped under Obama?
CAPISCE
2012/08/12 13:14:08
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18 votes
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78% | ||
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5 votes
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22% | ||
(Reuters/Brendan McDermid)
The Standard and Poor's building in New York, August 2, 2011. Ratings agency Standard and Poor's said in mid-July there was a 50-50 chance it would cut the U.S. rating in the next three months if lawmakers failed to craft a meaningful deficit-cutting plan.
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By Ravelle Mohammed , Christian Post Reporter
August 5, 2011|11:07 pm
In an unprecedented move, Standard & Poor’s has announced that the ratings firm would be downgrading the U.S. government’s top notch rating from an AAA to an AA+.
The world’s largest economy now has a credit rating that ranks below Liechtenstein and is equal to Belgium and New Zealand.
Around 1:30 p.m. on Friday, S&P; officers told the United States Treasury Department they planned to downgrade the U.S. debt and revealed their findings. Treasury officials caught a $2 trillion dollar error in S&P;’s math, which caused a several hour delay in the announcement.
A senior Treasury leader said, “This is a facts-be-damned decision. Their analysis was way off, but they wouldn’t budge.”
S&P; officials decided to go ahead with their downgrade, despite the two trillion dollar error, and announced the downgrade at 8 p.m.
S&P; has issued a press release with the official decision that the U.S. credit rating is now AA+, the first time in history that American government debt has not received its top rating of AAA. The release cites the recent Washington fight over raising the debt limit as the prime reason for its decision:
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.
Read the rest here.
Update: The Wall Street Journal's Damien Paletta has more on the math fight going on between the White House and S&P;:
S&P; officials notified the Treasury Department early Friday afternoon it was planning to downgrade the debt, a government official said, and the firm presented its report to the White House. S&P; has previously warned such a downgrade might come if Washington didn't move to comprehensively tackle its long-term fiscal woes.
After two hours of analysis, Treasury officials discovered that S&P; officials had miscalculated future deficit projections by close to $2 trillion. It immediately notified the company of the mistakes.
S&P; officials later called administration officials back to say they agreed about the mistakes, though they didn't say whether it would affect the rating. White House officials remained waiting Friday evening to see what the company would do.
Update: CNBC, via Twitter, reports that the White House pointed out an error in the S&P;'s computations and that the rating agency has acknowledged the error. In their truncated Twitter-ese, they say the nation's credit rating is hanging by a spreadsheet: "S&P; Either Revising Rational Or Deciding Against Downgrade."
Update: CNN's John King spoke with an Obama administration source who said S&P; notified the administration on Friday afternoon that a downgrade of the U.S.'s AAA credit rating is coming, but that the agency is now reconsidering after the White House argued that its economic models were flawed. According to a posting by Vaughn Sterling, a producer on CNN's Situation Room, King adds: "The official described the talks as a “moving target” and said “it’s clear some people there still want to go forward” and downgrade the US rating."
Update: More confirmation a downgrade is coming: CNBC's Kate Kelly is also reporting that government officials expect a downgrade. Citing "someone familiar with the matter," she reports that official expect S&P; to issue a downgrade "as early as this evening or take other possible action."
Latest Politics Posts:
Loading feed...
Original post: The federal government expects S&P; to downgrade the U.S. credit rating from it's current stellar AAA, ABC News's Jake Tapper reports. "Officials reasons given will be the political confusion surrounding the process of raising the debt ceiling, and lack of confidence that the political system will be able to agree to more deficit reduction," Tapper writes, adding, "A source says Republicans saying that they refuse to accept any tax increases as part of a larger deal will be part of the reason cited." Tapper's source was unsure of whether the downgrade would be to AA or the slightly better AA+.
S&P; defines an AAA credit rating as "Extremely strong capacity to meet financial commitments. Highest Rating." The AA rating is merely a "Very strong capacity to meet financial commitments."
Whispers that S&P; would downgrade Friday have been circulating on financial blogs. Joe Weisenthal at Business Insider says there's been "crazy chatter" about the rating. MSN Money's Kim Peterson reports that despite the rumors, many believed S&P; wouldn't downgrade since rival ratings agencies Moody's and Fitch said they wouldn't. A downgrade would mean higher interest rates--not to mention a blow to America's self-esteem, she writes.
But Forbes's Steve Schaefer dismissed the rumor, saying flatly, "this isn't going to happen." Why not? Because S&P; wouldn't want to stand alone in deciding to downgrade. It would "catch hell for going out on a limb on its own." A financial analyst said the rumor sounded like one that'd been started by "someone who wants the market to go down even further." Another also said S&P; would stay "politically sensitive" and not downgrade.
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Sort by popular now Sort by best rating Sort by newest first Sort by oldest first
Showing 7 comments
David
The Obama legacy - the President who resided over the downgrade of our credit for the first time in our history. This is all he will be remembered for.
Like
1 year ago
2 Likes
ShadrachSmithTop 10 Just another SockPuppet
Not many Liberals commenting on this one, can't think why?
Like
1 year ago
2 Likes
Vishal IyerTop 50
They simply do not care. They just want to live well in the present and do not give much concern to future generations who will have to pay the money back. Krugman and his minions still believe that we are in far too little debt.
Like
1 year ago
in reply to ShadrachSmith
bennyd
As usual, you cons ( and I mean con-men repubs) have stolen this Countries ability to have a fair and Democratic Nation by handing over our wealth to special interests creating expensive wars, not only monetarily, but in precious lives...for what? So that corporations run our lives and keep us conned.
Like
1 year ago
in reply to Vishal Iyer
ShadrachSmithTop 10 Just another SockPuppet
Your politics are nice and simple, it's the Republicans fault and you hates 'em for it.
Have you ever heard the word "simplistic"?
Like
1 year ago
in reply to bennyd
Vishal IyerTop 50
You mean running trillion dollar deficits and rejecting all reasonable deficit cutting plans as terrorism is not good fiscal policy?! Shocker!!
Like
1 year ago
1 Like
Kir (Politicoid)Top 50 I'm just your typical politicoid going about munching on corrupt politicians. To anyone else I'm quite friendly though, so don't worry,
We can ignore the S&P; temporarily and look to China, our single largest foreign creditor. China is saying that we can not longer just borrow our way out of situations. It beleives our debt has gotten too large, and is renewing the push towards a new global reserve currency.
Our credit rating along with the fact that we are the center of the global economy is the only thing keeping this country together. We do not produce anything else that is useful beyond our dollar and threasury bonds. If we do not look to truely cut our spending and soon, we're in trouble.
Like
1 year ago
3 Likes
M Subscribe by email
S RSS
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S&P; has issued a press release with the official decision that the U.S. credit rating is now AA+, the first time in history that American government debt has not received its top rating of AAA. The release cites the recent Washington fight over raising the debt limit as the prime reason for its decision:
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.
Read the rest here.
Update: The Wall Street Journal's Damien Paletta has more on the math fight going on between the White House and S&P;:
S&P; officials notified the Treasury Department early Friday afternoon it was planning to downgrade the debt, a government official said, and the firm presented its report to the White House. S&P; has previously warned such a downgrade might come if Washington didn't move to comprehensively tackle its long-term fiscal woes.
After two hours of analysis, Treasury officials discovered that S&P; officials had miscalculated future deficit projections by close to $2 trillion. It immediately notified the company of the mistakes.
S&P; officials later called administration officials back to say they agreed about the mistakes, though they didn't say whether it would affect the rating. White House officials remained waiting Friday evening to see what the company would do.
Update: CNBC, via Twitter, reports that the White House pointed out an error in the S&P;'s computations and that the rating agency has acknowledged the error. In their truncated Twitter-ese, they say the nation's credit rating is hanging by a spreadsheet: "S&P; Either Revising Rational Or Deciding Against Downgrade."
Update: CNN's John King spoke with an Obama administration source who said S&P; notified the administration on Friday afternoon that a downgrade of the U.S.'s AAA credit rating is coming, but that the agency is now reconsidering after the White House argued that its economic models were flawed. According to a posting by Vaughn Sterling, a producer on CNN's Situation Room, King adds: "The official described the talks as a “moving target” and said “it’s clear some people there still want to go forward” and downgrade the US rating."
Update: More confirmation a downgrade is coming: CNBC's Kate Kelly is also reporting that government officials expect a downgrade. Citing "someone familiar with the matter," she reports that official expect S&P; to issue a downgrade "as early as this evening or take other possible action."
Latest Politics Posts:
Loading feed...
Original post: The federal government expects S&P; to downgrade the U.S. credit rating from it's current stellar AAA, ABC News's Jake Tapper reports. "Officials reasons given will be the political confusion surrounding the process of raising the debt ceiling, and lack of confidence that the political system will be able to agree to more deficit reduction," Tapper writes, adding, "A source says Republicans saying that they refuse to accept any tax increases as part of a larger deal will be part of the reason cited." Tapper's source was unsure of whether the downgrade would be to AA or the slightly better AA+.
S&P; defines an AAA credit rating as "Extremely strong capacity to meet financial commitments. Highest Rating." The AA rating is merely a "Very strong capacity to meet financial commitments."
Whispers that S&P; would downgrade Friday have been circulating on financial blogs. Joe Weisenthal at Business Insider says there's been "crazy chatter" about the rating. MSN Money's Kim Peterson reports that despite the rumors, many believed S&P; wouldn't downgrade since rival ratings agencies Moody's and Fitch said they wouldn't. A downgrade would mean higher interest rates--not to mention a blow to America's self-esteem, she writes.
But Forbes's Steve Schaefer dismissed the rumor, saying flatly, "this isn't going to happen." Why not? Because S&P; wouldn't want to stand alone in deciding to downgrade. It would "catch hell for going out on a limb on its own." A financial analyst said the rumor sounded like one that'd been started by "someone who wants the market to go down even further." Another also said S&P; would stay "politically sensitive" and not downgrade.
Want to stay ahead of the curve? Sign up for National Journal’s AM & PM Must Reads. News and analysis to ensure you don’t miss a thing.
8Share on email
TIMELINE
The Rise of Paul Ryan
PICTURES
Romney and Ryan
Campaign 2012
Mitt's App Gets Scooped
PICTURES
VPs from the House
Leave a Comment
Disqus
Real-time updating is enabled.
Comments for this page are closed.
Sort by popular now Sort by best rating Sort by newest first Sort by oldest first
Showing 7 comments
David
The Obama legacy - the President who resided over the downgrade of our credit for the first time in our history. This is all he will be remembered for.
Like
1 year ago
2 Likes
ShadrachSmithTop 10 Just another SockPuppet
Not many Liberals commenting on this one, can't think why?
Like
1 year ago
2 Likes
Vishal IyerTop 50
They simply do not care. They just want to live well in the present and do not give much concern to future generations who will have to pay the money back. Krugman and his minions still believe that we are in far too little debt.
Like
1 year ago
in reply to ShadrachSmith
bennyd
As usual, you cons ( and I mean con-men repubs) have stolen this Countries ability to have a fair and Democratic Nation by handing over our wealth to special interests creating expensive wars, not only monetarily, but in precious lives...for what? So that corporations run our lives and keep us conned.
Like
1 year ago
in reply to Vishal Iyer
ShadrachSmithTop 10 Just another SockPuppet
Your politics are nice and simple, it's the Republicans fault and you hates 'em for it.
Have you ever heard the word "simplistic"?
Like
1 year ago
in reply to bennyd
Vishal IyerTop 50
You mean running trillion dollar deficits and rejecting all reasonable deficit cutting plans as terrorism is not good fiscal policy?! Shocker!!
Like
1 year ago
1 Like
Kir (Politicoid)Top 50 I'm just your typical politicoid going about munching on corrupt politicians. To anyone else I'm quite friendly though, so don't worry,
We can ignore the S&P; temporarily and look to China, our single largest foreign creditor. China is saying that we can not longer just borrow our way out of situations. It beleives our debt has gotten too large, and is renewing the push towards a new global reserve currency.
Our credit rating along with the fact that we are the center of the global economy is the only thing keeping this country together. We do not produce anything else that is useful beyond our dollar and threasury bonds. If we do not look to truely cut our spending and soon, we're in trouble.
Like
1 year ago
3 Likes
M Subscribe by email
S RSS
The National Journal Group has the right (but not the obligation) to monitor the comments and to remove any materials it deems inappropriate.
Comments powered by Disqus
Follow National Journal
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Executive Insight Briefing 8-9-12
August 9, 2012
Presentation Center
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August 10, 2012
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August 14, 2012
Learn More »
Most Read Articles
Romney's Choice of Ryan Aimed at Winning Middle Class
Obama Team Salivates Over Ryan Pick
No Convention Speeches for Gingrich, Perry, Bachmann and Cain
Why Ryan Could Make a Romney Victory Harder
Romney Campaign Staged Cat-and-Mouse Game to Conceal Ryan VP Pick
Special Section
The Next Economy: Tech Meets Market
Will the tech boom lead to more opportunity or more insecurity?
Columns
Ronald Brownstein: Political Connections
Widening Racial Chasm a Problem for Both Parties
August 9, 2012
Mitt Romney could run as well among whites as any Republican presidential challenger in the history of polling-and still lose. That equation carries threats for both parties.
Reid Wilson: On the Trail
The Standard and Poor's building in New York, August 2, 2011. Ratings agency Standard and Poor's said in mid-July there was a 50-50 chance it would cut the U.S. rating in the next three months if lawmakers failed to craft a meaningful deficit-cutting plan.
Featured Posts
Entertainment
'2016 – Obama's America' Movie: Critics Give Reviews Without Seeing Film?
The politically conservative makers of "2016 – Obama's America" expected to ...
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What Must Someone Believe in Order to Be Saved?
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Opinion
A Christian Nation?
The debate over whether America is a "Christian nation" has been raging for ...
By Ravelle Mohammed , Christian Post Reporter
August 5, 2011|11:07 pm
In an unprecedented move, Standard & Poor’s has announced that the ratings firm would be downgrading the U.S. government’s top notch rating from an AAA to an AA+.
The world’s largest economy now has a credit rating that ranks below Liechtenstein and is equal to Belgium and New Zealand.
Around 1:30 p.m. on Friday, S&P; officers told the United States Treasury Department they planned to downgrade the U.S. debt and revealed their findings. Treasury officials caught a $2 trillion dollar error in S&P;’s math, which caused a several hour delay in the announcement.
A senior Treasury leader said, “This is a facts-be-damned decision. Their analysis was way off, but they wouldn’t budge.”
S&P; officials decided to go ahead with their downgrade, despite the two trillion dollar error, and announced the downgrade at 8 p.m.
S&P; has issued a press release with the official decision that the U.S. credit rating is now AA+, the first time in history that American government debt has not received its top rating of AAA. The release cites the recent Washington fight over raising the debt limit as the prime reason for its decision:
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.
Read the rest here.
Update: The Wall Street Journal's Damien Paletta has more on the math fight going on between the White House and S&P;:
S&P; officials notified the Treasury Department early Friday afternoon it was planning to downgrade the debt, a government official said, and the firm presented its report to the White House. S&P; has previously warned such a downgrade might come if Washington didn't move to comprehensively tackle its long-term fiscal woes.
After two hours of analysis, Treasury officials discovered that S&P; officials had miscalculated future deficit projections by close to $2 trillion. It immediately notified the company of the mistakes.
S&P; officials later called administration officials back to say they agreed about the mistakes, though they didn't say whether it would affect the rating. White House officials remained waiting Friday evening to see what the company would do.
Update: CNBC, via Twitter, reports that the White House pointed out an error in the S&P;'s computations and that the rating agency has acknowledged the error. In their truncated Twitter-ese, they say the nation's credit rating is hanging by a spreadsheet: "S&P; Either Revising Rational Or Deciding Against Downgrade."
Update: CNN's John King spoke with an Obama administration source who said S&P; notified the administration on Friday afternoon that a downgrade of the U.S.'s AAA credit rating is coming, but that the agency is now reconsidering after the White House argued that its economic models were flawed. According to a posting by Vaughn Sterling, a producer on CNN's Situation Room, King adds: "The official described the talks as a “moving target” and said “it’s clear some people there still want to go forward” and downgrade the US rating."
Update: More confirmation a downgrade is coming: CNBC's Kate Kelly is also reporting that government officials expect a downgrade. Citing "someone familiar with the matter," she reports that official expect S&P; to issue a downgrade "as early as this evening or take other possible action."
Latest Politics Posts:
Loading feed...
Original post: The federal government expects S&P; to downgrade the U.S. credit rating from it's current stellar AAA, ABC News's Jake Tapper reports. "Officials reasons given will be the political confusion surrounding the process of raising the debt ceiling, and lack of confidence that the political system will be able to agree to more deficit reduction," Tapper writes, adding, "A source says Republicans saying that they refuse to accept any tax increases as part of a larger deal will be part of the reason cited." Tapper's source was unsure of whether the downgrade would be to AA or the slightly better AA+.
S&P; defines an AAA credit rating as "Extremely strong capacity to meet financial commitments. Highest Rating." The AA rating is merely a "Very strong capacity to meet financial commitments."
Whispers that S&P; would downgrade Friday have been circulating on financial blogs. Joe Weisenthal at Business Insider says there's been "crazy chatter" about the rating. MSN Money's Kim Peterson reports that despite the rumors, many believed S&P; wouldn't downgrade since rival ratings agencies Moody's and Fitch said they wouldn't. A downgrade would mean higher interest rates--not to mention a blow to America's self-esteem, she writes.
But Forbes's Steve Schaefer dismissed the rumor, saying flatly, "this isn't going to happen." Why not? Because S&P; wouldn't want to stand alone in deciding to downgrade. It would "catch hell for going out on a limb on its own." A financial analyst said the rumor sounded like one that'd been started by "someone who wants the market to go down even further." Another also said S&P; would stay "politically sensitive" and not downgrade.
Want to stay ahead of the curve? Sign up for National Journal’s AM & PM Must Reads. News and analysis to ensure you don’t miss a thing.
8Share on email
TIMELINE
The Rise of Paul Ryan
PICTURES
Romney and Ryan
Campaign 2012
Mitt's App Gets Scooped
PICTURES
VPs from the House
Leave a Comment
Disqus
Real-time updating is enabled.
Comments for this page are closed.
Sort by popular now Sort by best rating Sort by newest first Sort by oldest first
Showing 7 comments
David
The Obama legacy - the President who resided over the downgrade of our credit for the first time in our history. This is all he will be remembered for.
Like
1 year ago
2 Likes
ShadrachSmithTop 10 Just another SockPuppet
Not many Liberals commenting on this one, can't think why?
Like
1 year ago
2 Likes
Vishal IyerTop 50
They simply do not care. They just want to live well in the present and do not give much concern to future generations who will have to pay the money back. Krugman and his minions still believe that we are in far too little debt.
Like
1 year ago
in reply to ShadrachSmith
bennyd
As usual, you cons ( and I mean con-men repubs) have stolen this Countries ability to have a fair and Democratic Nation by handing over our wealth to special interests creating expensive wars, not only monetarily, but in precious lives...for what? So that corporations run our lives and keep us conned.
Like
1 year ago
in reply to Vishal Iyer
ShadrachSmithTop 10 Just another SockPuppet
Your politics are nice and simple, it's the Republicans fault and you hates 'em for it.
Have you ever heard the word "simplistic"?
Like
1 year ago
in reply to bennyd
Vishal IyerTop 50
You mean running trillion dollar deficits and rejecting all reasonable deficit cutting plans as terrorism is not good fiscal policy?! Shocker!!
Like
1 year ago
1 Like
Kir (Politicoid)Top 50 I'm just your typical politicoid going about munching on corrupt politicians. To anyone else I'm quite friendly though, so don't worry,
We can ignore the S&P; temporarily and look to China, our single largest foreign creditor. China is saying that we can not longer just borrow our way out of situations. It beleives our debt has gotten too large, and is renewing the push towards a new global reserve currency.
Our credit rating along with the fact that we are the center of the global economy is the only thing keeping this country together. We do not produce anything else that is useful beyond our dollar and threasury bonds. If we do not look to truely cut our spending and soon, we're in trouble.
Like
1 year ago
3 Likes
M Subscribe by email
S RSS
The National Journal Group has the right (but not the obligation) to monitor the comments and to remove any materials it deems inappropriate.
Comments powered by Disqus
Follow National Journal
Latest on Membership
Weekly Update
Executive Insight Briefing 8-9-12
August 9, 2012
Presentation Center
Wind-Energy Jobs
August 10, 2012
Member Events
Heat Risk Map Webinar
August 14, 2012
Learn More »
Most Read Articles
Romney's Choice of Ryan Aimed at Winning Middle Class
Obama Team Salivates Over Ryan Pick
No Convention Speeches for Gingrich, Perry, Bachmann and Cain
Why Ryan Could Make a Romney Victory Harder
Romney Campaign Staged Cat-and-Mouse Game to Conceal Ryan VP Pick
Special Section
The Next Economy: Tech Meets Market
Will the tech boom lead to more opportunity or more insecurity?
Columns
Ronald Brownstein: Political Connections
Widening Racial Chasm a Problem for Both Parties
August 9, 2012
Mitt Romney could run as well among whites as any Republican presidential challenger in the history of polling-and still lose. That equation carries threats for both parties.
Reid Wilson: On the Trail
S&P; has issued a press release with the official decision that the U.S. credit rating is now AA+, the first time in history that American government debt has not received its top rating of AAA. The release cites the recent Washington fight over raising the debt limit as the prime reason for its decision:
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.
Read the rest here.
Update: The Wall Street Journal's Damien Paletta has more on the math fight going on between the White House and S&P;:
S&P; officials notified the Treasury Department early Friday afternoon it was planning to downgrade the debt, a government official said, and the firm presented its report to the White House. S&P; has previously warned such a downgrade might come if Washington didn't move to comprehensively tackle its long-term fiscal woes.
After two hours of analysis, Treasury officials discovered that S&P; officials had miscalculated future deficit projections by close to $2 trillion. It immediately notified the company of the mistakes.
S&P; officials later called administration officials back to say they agreed about the mistakes, though they didn't say whether it would affect the rating. White House officials remained waiting Friday evening to see what the company would do.
Update: CNBC, via Twitter, reports that the White House pointed out an error in the S&P;'s computations and that the rating agency has acknowledged the error. In their truncated Twitter-ese, they say the nation's credit rating is hanging by a spreadsheet: "S&P; Either Revising Rational Or Deciding Against Downgrade."
Update: CNN's John King spoke with an Obama administration source who said S&P; notified the administration on Friday afternoon that a downgrade of the U.S.'s AAA credit rating is coming, but that the agency is now reconsidering after the White House argued that its economic models were flawed. According to a posting by Vaughn Sterling, a producer on CNN's Situation Room, King adds: "The official described the talks as a “moving target” and said “it’s clear some people there still want to go forward” and downgrade the US rating."
Update: More confirmation a downgrade is coming: CNBC's Kate Kelly is also reporting that government officials expect a downgrade. Citing "someone familiar with the matter," she reports that official expect S&P; to issue a downgrade "as early as this evening or take other possible action."
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Original post: The federal government expects S&P; to downgrade the U.S. credit rating from it's current stellar AAA, ABC News's Jake Tapper reports. "Officials reasons given will be the political confusion surrounding the process of raising the debt ceiling, and lack of confidence that the political system will be able to agree to more deficit reduction," Tapper writes, adding, "A source says Republicans saying that they refuse to accept any tax increases as part of a larger deal will be part of the reason cited." Tapper's source was unsure of whether the downgrade would be to AA or the slightly better AA+.
S&P; defines an AAA credit rating as "Extremely strong capacity to meet financial commitments. Highest Rating." The AA rating is merely a "Very strong capacity to meet financial commitments."
Whispers that S&P; would downgrade Friday have been circulating on financial blogs. Joe Weisenthal at Business Insider says there's been "crazy chatter" about the rating. MSN Money's Kim Peterson reports that despite the rumors, many believed S&P; wouldn't downgrade since rival ratings agencies Moody's and Fitch said they wouldn't. A downgrade would mean higher interest rates--not to mention a blow to America's self-esteem, she writes.
But Forbes's Steve Schaefer dismissed the rumor, saying flatly, "this isn't going to happen." Why not? Because S&P; wouldn't want to stand alone in deciding to downgrade. It would "catch hell for going out on a limb on its own." A financial analyst said the rumor sounded like one that'd been started by "someone who wants the market to go down even further." Another also said S&P; would stay "politically sensitive" and not downgrade.
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David
The Obama legacy - the President who resided over the downgrade of our credit for the first time in our history. This is all he will be remembered for.
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1 year ago
2 Likes
ShadrachSmithTop 10 Just another SockPuppet
Not many Liberals commenting on this one, can't think why?
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1 year ago
2 Likes
Vishal IyerTop 50
They simply do not care. They just want to live well in the present and do not give much concern to future generations who will have to pay the money back. Krugman and his minions still believe that we are in far too little debt.
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1 year ago
in reply to ShadrachSmith
bennyd
As usual, you cons ( and I mean con-men repubs) have stolen this Countries ability to have a fair and Democratic Nation by handing over our wealth to special interests creating expensive wars, not only monetarily, but in precious lives...for what? So that corporations run our lives and keep us conned.
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1 year ago
in reply to Vishal Iyer
ShadrachSmithTop 10 Just another SockPuppet
Your politics are nice and simple, it's the Republicans fault and you hates 'em for it.
Have you ever heard the word "simplistic"?
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1 year ago
in reply to bennyd
Vishal IyerTop 50
You mean running trillion dollar deficits and rejecting all reasonable deficit cutting plans as terrorism is not good fiscal policy?! Shocker!!
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1 year ago
1 Like
Kir (Politicoid)Top 50 I'm just your typical politicoid going about munching on corrupt politicians. To anyone else I'm quite friendly though, so don't worry,
We can ignore the S&P; temporarily and look to China, our single largest foreign creditor. China is saying that we can not longer just borrow our way out of situations. It beleives our debt has gotten too large, and is renewing the push towards a new global reserve currency.
Our credit rating along with the fact that we are the center of the global economy is the only thing keeping this country together. We do not produce anything else that is useful beyond our dollar and threasury bonds. If we do not look to truely cut our spending and soon, we're in trouble.
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1 year ago
3 Likes
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All American 2012/08/12 13:29:18Romney/Ryan
+3Romney/Ryan acknowledge it and have a plan for addressing it. Obama n company pretends the problem doesn't exist.
He can't make his payments for his Cadillac so he takes a loan for a Rolls Royce to fix the problem
i chose the one likely ...
to piss more off-
no one offered as candidates ...
will achieve this-
all are cfr stooges...
and the cfr plan is to weaken ...
the worlds strongest economys-
I'd prefer having Obama fix it..
Even if we allowed Obama full rein to implement his tax the rich class warfare plan, the total revenue gathered wouldn't pay the current administrations spending for more than a week. The solution isn't more taxation, there simply isn't enough money. The solution is less spending. I may not agree with everything Romney stands for, but at least he understands that feel good policies are not what we need.
The BHO/Biden team is a non-starter.