S&P Confirms Downgrade of US Credit Rating
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Late Friday night, Standard & Poor's Ratings confirmed rumors which had been swirling around the Street for several weeks -- a credit rating downgrade of the US government.
The ratings firm, the last of three to act in either affirming or downgrading the nation, moved its triple-A rating lower by one notch to 'AA+'. S&P said the US's recent budget deal didn't do enough to address a dismal outlook for the financial system. The firm also said the outlook for the 'AA+' rating is Negative, meaning S&P doesn't see the US regaining the 'AAA' rating for some time.
S&P affirmed its 'A-1+' short-term rating on the U.S.
From the Standard & Poor's report:
We lowered our long-term rating on the U.S. because we believe that the
prolonged controversy over raising the statutory debt ceiling and the related
fiscal policy debate indicate that further near-term progress containing the
growth in public spending, especially on entitlements, or on reaching an
agreement on raising revenues is less likely than we previously assumed and
will remain a contentious and fitful process. We also believe that the fiscal
consolidation plan that Congress and the Administration agreed to this week
falls short of the amount that we believe is necessary to stabilize the
general government debt burden by the middle of the decade.
Our lowering of the rating was prompted by our view on the rising public
debt burden and our perception of greater policymaking uncertainty, consistent
with our criteria (see "Sovereign Government Rating Methodology and Assumptions," June 30, 2011, especially Paragraphs 36-41). Nevertheless, we view the U.S. federal government's other economic, external, and monetary credit attributes, which form the basis for the sovereign rating, as broadly unchanged.
The ratings firm, the last of three to act in either affirming or downgrading the nation, moved its triple-A rating lower by one notch to 'AA+'. S&P said the US's recent budget deal didn't do enough to address a dismal outlook for the financial system. The firm also said the outlook for the 'AA+' rating is Negative, meaning S&P doesn't see the US regaining the 'AAA' rating for some time.
S&P affirmed its 'A-1+' short-term rating on the U.S.
From the Standard & Poor's report:
We lowered our long-term rating on the U.S. because we believe that the
prolonged controversy over raising the statutory debt ceiling and the related
fiscal policy debate indicate that further near-term progress containing the
growth in public spending, especially on entitlements, or on reaching an
agreement on raising revenues is less likely than we previously assumed and
will remain a contentious and fitful process. We also believe that the fiscal
consolidation plan that Congress and the Administration agreed to this week
falls short of the amount that we believe is necessary to stabilize the
general government debt burden by the middle of the decade.
Our lowering of the rating was prompted by our view on the rising public
debt burden and our perception of greater policymaking uncertainty, consistent
with our criteria (see "Sovereign Government Rating Methodology and Assumptions," June 30, 2011, especially Paragraphs 36-41). Nevertheless, we view the U.S. federal government's other economic, external, and monetary credit attributes, which form the basis for the sovereign rating, as broadly unchanged.
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