Another Debt Downgrade On The Way?

Merrill Lynch is telling investors to expect another downgrade of U.S. debt before the end of the year:

The United States will likely suffer the loss of its triple-A credit rating from another major rating agency by the end of this year due to concerns over the deficit, Bank of America Merrill Lynch forecasts.

The trigger would be a likely failure by Congress to agree on a credible long-term plan to cut the U.S. deficit, the bank said in a research note published on Friday.

A second downgrade — either from Moody’s or Fitch — would follow Standard & Poor’s downgrade in August on concerns about the government’s budget deficit and rising debt burden. A second loss of the country’s top credit rating would be an additional blow to the sluggish U.S. economy, Merrill said.

“The credit rating agencies have strongly suggested that further rating cuts are likely if Congress does not come up with a credible long-run plan” to cut the deficit, Merrill’s North American economist, Ethan Harris, wrote in the report.

“Hence, we expect at least one credit downgrade in late November or early December when the super committee crashes,” he added.

Just in time for Christmas!

FILED UNDER: Congress, Deficit and Debt, Economics and Business, Quick Takes, US Politics
Doug Mataconis
About Doug Mataconis
Doug Mataconis held a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010 and contributed a staggering 16,483 posts before his retirement in January 2020. He passed for too young in July 2021.


  1. Tsar Nicholas II says:

    It’s inevitable.

  2. john personna says:

    The vibe on the Joint Select Committee on Deficit Reduction seems pretty dark.

    Who invented that thing, Boehner?

  3. rjs says:

    didnt the rest of the world pile in to US debt after the last downgrade?

  4. MBunge says:

    @rjs: “didnt the rest of the world pile in to US debt after the last downgrade?”

    I believe that’s true, but it’s one of those situations where everything looks fine right up until you go off the edge of the cliff and fall to your death. In the global economic reorganization that followed the end of the Cold War, the U.S. was placed at the heart of the whole system. It’s built so that structurally, intellectually and emotionally, the rest of the world is invested in propping up America because if it gives way, the jig is up for everyone else on the planet. But when that moment comes that people stop thinking about preventing disaster and start thinking about limiting their exposure to it, that’s when it all hits the fan. A second downgrade may not be that moment, but when it comes…


  5. de stijl says:

    I have a plan (Baldrick might even call it “cunning”). Do nothing.

    Let the Bush tax cuts sunset.

    If that’s not enough for you, we can eliminate the FICA withholding limit. Still not enough? Leave Afghanistan.

  6. Gustopher says:

    Well, when we have one political party that has pushed us to within days of default this summer, I really can’t blame the ratings agencies for downgrading us.

    Thanks, Republicans!

  7. Ben Wolf says:

    Treasuries yielda fell and prices rose after the last downgrade because the ratings agencies have no idea what they’re doing. U.S. bonds are risk free because the government cannot involuntarily default or run out of money; Merril Lynch and S&P don’t understand that, which is why nobody listened to them

  8. lunaticllama says:

    Let’s decrease aggregate demand some more, so we can get another debt downgrade 6 months after this one when the economy becomes further depressed.