First Time in History: United States Credit Rating Downgraded

August 5, 2011

Standards and Poor downgraded the AAA credit rating of the U.S. to an AA-plus.  The U.S. has maintained an AAA rating since 1917.  This is the first time in history that the credit rating has been lowered for the United States.

For months Americans have had to watch as our government has been held hostage by partisan politics.  This is just one of the unforgivable results of a divisive Congress who, despite warnings, could not compromise to take effective action to reduce our deficit.  An action that should have included putting an end to Bush tax cuts and forcing the rich and corporations to pay their fair share of taxes.

The statement from Standards and Poor states:
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 statement from Standards and Poor recognizes the failure of America's leaders:
The political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy. Despite this year's wide-ranging debate, in our view, the differences between political parties have proven to be extraordinarily difficult to bridge, and, as we see it, the resulting agreement fell well short of the comprehensive fiscal consolidation program that some proponents had envisaged until quite recently. Republicans and Democrats have only been able to agree to relatively modest savings on discretionary spending while delegating to the Select Committee decisions on more comprehensive measures. It appears that for now, new revenues have dropped down on the menu of policy options. In addition, the plan envisions only minor policy changes on Medicare and little change in other entitlements, the containment of which we and most other independent observers regard as key to long-term fiscal sustainability.
The result of the credit reduction spells bad news for every American citizen who will see higher mortgage rates and higher interest rates on auto and other loans.

The two other credit rating agencies, Fitch Ratings and Moody's Investor Service have kept their AAA ratings of the U.S., but warn that they could also lower them "if lawmakers fail to enact debt reduction measures and the economy weakens."

Standards and Poor threatened that they could reduce the credit rating even more. From Bloomberg:
The rating may be lowered further if spending reductions are lower than agreed to, interest rates rise or “new fiscal pressures” result in higher general government debt.
S and P also changed its assumption that the 2001 and 2003 tax cuts would expire by the end of 2012 “because the majority of Republicans in Congress continue to resist any measure that would raise revenues.”
Many have been saying that the ultra conservatives were deliberately out to further ruin the U.S. economy to win back the presidency. 

Robert Cavner reported on The Huffington Post:
The Republicans, led by the Tea Party, have finally succeeded in another step in their quest to wreck the US economy, oddly believing that it will help them win the 2012 election. Their slash and burn, no-revenue dogma that won out in the manufactured debt crisis that came to a head last Monday failed at the one goal it should have set for themselves; that is, to calm the markets and provide assurance of the strength of the US economy. Their 24/7 assault on the economy and job recovery, all in the name of taking down the President, only succeeded in inflicting the damage that business leaders, banks, and the Treasury begged them not to do. 
Will finger pointing now occupy the time of our failed leaders? Or will this shocking result of their ineffectiveness stun them into working together to take immediate steps to end tax cuts and create a comprehensive plan to reduce the deficit?


Anonymous said...

Now that the Republicans in US are taking a lot of heat, more than the Dem. for the Obamanomics of reckless spending by throwing money at the problem and thinking it will change. (sharing the wealth)
Will this now cause this Gov. and his clowns that recently took over the Rep. party in the NMI to change again in an attempt to stay on the "winning side"

I do not claim any party, I only support who I think would do the job.
But watching this last fiasco, daily on all the news channels and the internet feeds, with the politicians in DC, I have come to resent them all with a passion.
Especially the so called "Tea Party" I never took much notice or followed that act until it became apparent that We possibly might not have gotten paid our benefits from SS and VA.and they want to cut SS and other elderly programs
All of them have a verry low public approval rating from the President down.(last I read was in the low 40%)
I was anticipating a new President this upcoming election, but now it probably will be a close election if somebody stable will comes out

Anonymous said...

I blame people who vote for selfish ego maniacs trying to make a name even by being bad. People who think extremist tea party people are funny. People who don't study the issues and don't get it. Orange Speaker needs to own this.