Posts Tagged ‘Standard and Poor’s’
April 18th, 2011 at 1:56 pm
S&P Lowers Long-Term Outlook on U.S. Credit Rating to “Negative”

Standard and Poor’s spooked markets and sent news rooms scrambling today with its decision to downgrade the long-term outlook for the U.S.’s credit rating to “negative” from “stable.”  In a statement released this morning, the ratings agency wrote:

Because the U.S. has, relative to its ‘AAA’ peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable.

We believe there is a material risk that U.S. policymakers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013; if an agreement is not reached and meaningful implementation is not begun by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer ‘AAA’ sovereigns.

The White House swiftly responded, calling the decision a “political judgment” with which it disagrees. 

Really?  The national debt is more than $14 trillion and climbing.  The federal government borrows more than 40 cents for every dollar it spends.  Entitlement spending is spiraling out of control.  And last week, the federal government was within minutes of shutting down because President Obama and Congressional leaders were haggling over what ended up being a paltry few hundred million dollars in spending cuts from this year’s projected $1.65 trillion deficit. 

While the credit outlook downgrade is being reported as a surprise, it shouldn’t surprise anyone. All S&P has done is acknowledge the obvious.  Let’s hope President Obama and Congressional leaders get serious about doing the same.