So after the theatrical and disingenuous show that President Obama, the White House, and Congress performed (in an effort to scare us into think Armadebtdon would arrive), we inadvertantly hurt our own credit rating. The rating agencies started to scrutinize why we had to get another increase beyond the 14 trillion dollars, and thus they saw more of the reality we all live in. Moody’s gave us a pass last week, but the S&P decided to play it straight.
Even though the stock markets were crazy this week, I think next week will be even crazier. I don’t think most people saw this coming and investors felt safer after the debt ceiling was raised. The truth is unemployment and foreclosures have been bad for the past 3 years (and still getting worse) and the stimulus spending, the bailout packages, the creation of more useless agencies (TSA and Homeland) and all the other bullcrap government spending has been a waste. This is on top of the 3 wars we have been fighting in.
Market Watch:
S&P lowered its rating on the U.S. by a notch to AA+ and, to compound the embarrassment, said the outlook is negative as well, as it threatened another reduction in two years. The rating agency said the deal reached by lawmakers to cut the federal deficit by an estimated $2.1 trillion over a decade didn’t go far enough, and “America’s governance and policymaking [is] becoming less stable, less effective, and less predictable than what we previously believed.” Read text of downgrade.
S&P, a unit of McGraw-Hill MHP -3.43% , had said in July that $4 trillion in cuts over a decade would be required if the U.S. were to keep its triple-A rating. The U.S. has over $14 trillion in debt, and, even after the deal reached this week, is anticipated to add another $7 trillion over the next decade. Read more on debt-ceiling deal.
By S&P’s analysis, the U.S. debt-to-GDP ratio will hit 85% by 2021.
The move caps a wild day for markets and S&P itself. Multiple press reports indicated S&P had delayed downgrading U.S. debt after the White House — which had received a draft — spotted errors estimated to be worth $2 trillion. Full story: S&P said to back away from U.S. downgrade.
A Treasury spokesman said those errors made the decision “flawed.”
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