S&P Downgrades US Credit to AA+, With a Negative Outlook
August 5, 2011 - 6:15 pm
United States of America Long-Term Rating Lowered To ‘AA+’ On Political Risks And Rising Debt Burden; Outlook Negative
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.
And just to make things even more fun, Treasury says it found a mathematical error in S&P’s downgrade work.
S&P officials notified the Treasury Department early Friday afternoon it was planning to downgrade the U.S. government’s debt from the AAA rating it has held for decades, a government official said, and it 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 to say they agreed with the administration’s critique, though they did not say whether it would affect their rating. White House officials remained waiting Friday evening to see what the company would do.
Turbo Tax Tim’s Treasury calls out one of the credit ratings agencies that led us into the financial collapse and is now downgrading our national credit — and turns out to be right: S&P made a $2 trillion mistake. So, yeah, it’s hard to have much confidence in any of these people.
More: Just a small point of compare and contrast here — while President Obama has presided over the unprecedented downgrading of US credit, a certain governor of a large southern state has presided over the elevation of his state’s credit rating.
That’s right. Rick Perry has led Texas to the point where its credit rating is equal to that of the United States.
Ask yourself: Which would you rather have as president?
Update: As commenter Wigglesworth notes, we might get downgraded again in two years if the US doesn’t kick the spending addiction.
There’s already a downgrade reaction website, by Let Freedom Ring.
More: Also read the Tatler’s coverage of GOP contenders reacting to the downgrade, and a call for Treasury Secretary Tim Geithner to resign.