Excerpt
The day after Standard & Poor’s took the unprecedented step of stripping the United States government of its top credit rating, the ratings agency offered a full-throated defense of its decision, calling the bitter stand-off between President Obama and Congress over raising the debt ceiling a “debacle.” It warned that further downgrades may lie ahead.
In an unusual Saturday conference call with reporters, senior S.& P. officials insisted the ratings firm hadn’t overstepped its bounds by focusing on the political paralysis in Washington as much as fiscal policy in determining the new rating. “The debacle over the debt ceiling continued until almost the midnight hour,” said John B. Chambers, chairman of S.& P.’s sovereign ratings committee.
Another S.& P. official, David Beers, added that “fiscal policy, like other government policy, is fundamentally a political process.”
Initial reactions from Congressional leaders suggested that S.& P.’s action was unlikely to force consensus on the fundamental divide over spending and taxes. Politicians on both sides used the decision to bolster their own long-standing positions.
Officials at the White House and Treasury criticized S.& P.’s move as based on faulty budget accounting that did not factor in the just-enacted deal for increasing the debt limit.
Gene Sperling, the director of the White House national economic council, called the difference, totaling over $2 trillion, “breathtaking” and said that “the amateurism it displayed” suggested “an institution starting with a conclusion and shaping any arguments to fit it.”
Even as the ratings agency insisted on Saturday that its move shouldn’t have come as a shock, it reverberated around the world. Officials from China to Europe scrambled to assess the downgrade’s impact on the already troubled global economy, and political leaders in the United States sought to frame the issue in their favor.
"S.&P. Downgrade Is Seen as Adding Urgency to Debt-Cutting Panel" by ROBERT PEAR, New York Times 8/7/2011
Excerpt
The downgrade of the United States government’s credit rating by Standard & Poor’s is almost sure to increase pressure on a new Congressional “supercommittee” to mute ideological disagreements and recommend a package of deficit-reduction measures far exceeding its original goal of at least $1.5 trillion, lawmakers said Sunday.
Even before the panel is appointed, its mission is expanding. Its role is not just to cut the annual budget deficit and slow the explosive growth of federal debt but also to appease the markets and help restore the United States’ top credit rating of AAA. Otherwise, taxpayers may eventually have to pay more in interest for every dollar borrowed by the Treasury.
The report certainly got the attention of Capitol Hill. “I think this is one of the most telling, important moments in our country’s history right now,” Senator John Kerry, Democrat of Massachusetts, said Sunday on the NBC program “Meet the Press.” He added: “This poses a set of choices not just about a recession. It’s about a financial crisis and the structure of our economy, which really has been misallocating capital.”
In the S.&P. report on Friday outlining the reasons for removing long-term Treasury debt from its list of nearly risk-free investments, the company cited doubts about the ability of the two political parties to bridge their gulf on fiscal policy.
Credit rating agencies have thus emerged as a powerful constituency whose concerns are taken seriously by Congress.
Of course, the Republicans continue to blame President Obama and fail to acknowledge that Republican policies 2000 - 2008 got our economy in this mess in the first place.
It also perpetuates the fantasy that ANYONE can fix this very big problem, that was 8yrs in the making, in a short time.
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