U.S. Expecting Debt Downgrade From Standard & Poor’s Tonight
Since early this morning, there’s been a rumor floating around Wall Street that Standard & Poor’s would be downgrading U.S> debt after the markets closed today. Now, ABC News is reporting that Federal officials are expecting that it will indeed occur:
A government official tells ABC News that the federal government is expecting and preparing for bond rating agency Standard & Poor’s to downgrade the rating of US debt from its current AAA value.
Officials reasons given will be the political confusion surrounding the process of raising the debt ceiling, and lack of confidence that the political system will be able to agree to more deficit reduction. A source says Republicans saying that they refuse to accept any tax increases as part of a larger deal will be part of the reason cited.
If this happens, expect it to be the story of the weekend and, perhaps, a game changer in the debate over tax increases.
Fitch and Moody’s have said that they’re affirming the US AAA rating still.
This really surprises me. I’ve been saying that:
– ratings agencies follow, they don’t lead
– no one really needs them for sovereign debt
– the bond rates speak for themselves
– nobody believes them anyway
If S&P tried to lead, and it had an effect, that would pretty much prove me wrong.
FWIW, I’d give the US debt “AAA, with a footnote” 😉
@john personna: Isn’t that basically what Fitch and Moody’s did?
Breaking news is that the S&P downgrade is now ‘inoperative’ — as a great Republican President once said. Seems they made a little math mistake. Amounted to $2 Trillion. Not a serious error like that one with the Mortgage Default Swaps, just $2 Trillion. Keep walking. Nothing to see here.
The fundamental message from S&P is that Congress is out of balance — too much yin, not enough yang.
You cannot proclaim that you want to significantly reduce the national debt solely through budget cuts and refuse to recognize that revenue increases via taxation (whether it be eliminating corporate tax breaks or allowing the Bush era “temporary” reductions to expire) is also an essential component to the overall solution.
And if you are concerned about high unemployment, then you cannot do everything in your power to induce layoffs of public employees, and then point at the resulting increase in unemployed Americans and insist that the opposition bears sole responsibility for the outcome.
This downgrade was the only fair thing to do.
If it is based on a math error, I’m sure that in no time they can borrow their way there, unless they take it as a warning, a “wakeup call”, but we all know they won’t.