S & P Slashes US Debt Rating

Aug 6, 2011 by Editor Fred D

Senator John Kerry (D-MA) was on MSNBC, see Americas Next Move, exercising his first amendment right to free speech and telling the media that they should not allow the TEA Party a voice in the media. Meanwhile over in reality world Standard and Poors was getting ready to release they report that would downgrade United States sovereign debt from perfect AAA to AA+.

Had the progressives in Washington listened to the TEA Party and made some real cuts in spending, at least the $4 trillion, that Standard and Poors was looking for, we would not be facing higher interest rates.

Standards and Poors gives the following overview:

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.

There report compares the United States to countries such as Canada, France, Germany and the United Kingdom. They expect that no later than 2015 those sovereign debtors will have their net public debts in decline to GDP; whereas they are expecting the Unites States to continue to rise in relation to GDP.

Standard and Poors ‘Outlook’ states “a higher public debt trajectory than we currently assume could lead us to lower the long-term rating again.”

To read the complete report click here: “United States of America Long-Term Rating Lowered To ‘AA+’ On Political Risks And Rising Debt Burden; Outlook Negative”

To see video reports see US Debt Rating Video.

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