America’s AAA status has been stripped by credit rating agency Standard & Poor’s. In July, the U.S.’s rating was first put on “CreditWatch with negative implications” by S&P as the debate about the debt ceiling spiraled out of control. The guidelines the U.S. were given included raising the debt ceiling and developing a “credible” plan to tackle the country’s long-term debt.
U.S. Falling Short, Says S&P
This past Friday, S&P decided that the U.S. had come up short on these goals. As they said,
“The downgrade reflects our opinion that the … plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.”
S&P also pointed a finger at policymakers in Washington, saying,”The political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed.”
The United States was first given the coveted AAA rating in 1917. The rating analyzes risk and gives debt a “grade” that shows how well the borrower will be able to pay off the underlying loans. The U.S. is now rated AA+, which is still strong, but certainly not the highest rating.Many economists explain that the downgrade is no big deal. The U.S., they say, will still be able to pay its bills for the conceivable future and the downgrade only reflects one agency’s opinion.
Obama, Romer, Carney Speak
Obama, for his part, refrained from issuing any comment while he enjoyed the weekend at Camp David. His press secretary, Jay Carney, issued a subdued statement that didn’t refer directly to the downgrade.A former Obama economic advisor, Christine Romer, however, had some choice words about the downgrade. Obama’s first chair of the White House Council of Economic Advisers said, while being interviewed on HBO’s “Real Time with Bill Maher,” that the U.S. is
“pretty darn fu**ed.”
Ms. Romer was asked what the downgrade will mean for the U.S. economy. Prior to her answer, there was a clip for a segment on Maher’s show called “How Fu**ed Are We?” and her response was “pretty darn fu**ed.”