S&P Warns Of Future Downgrades
Just in case Washington didn’t get the message that Standard & Poor’s sent last night, they made it extra clear today:
One day after lowering the nation’s platinum triple-A credit rating, Standard & Poor’s analysts warned Saturday that the U.S. government could face a second downgrade if the economy continues to struggle and the government fails to make the cuts outlined in the debt ceiling agreement.
The ratings agency on Friday downgraded the nation to AA+ for the first time in history, saying partisanship in Washington is preventing dramatic deficit reduction.
S&P managing director John Chambers told reporters on a Saturday conference call that the toxic mix of a listless economy and political infighting will cause government debt to grow.
“Compared to some other highly rated governments, the U.S. government does not have the proactive ability to put public finances on a firm footing,” Chambers said.
His colleague David Beers said the partisan discord increases the risk that Washington will not achieve effective policy remedies.
“For that reason, there’s a lot of uncertainty about the future debt burden,” Beers said.
When S&P pulled the triple-A rating, it projected that net government debt would equal 85 percent of the U.S. Gross Domestic Product in 2021. That could rise to 101 percent by 2021 if the economy does not improve, Chambers said.
A debt ratio that high could knock the current U.S. rating of AA+ down to AA.
In other words Washington, it’s time to clean up your act. All of you.