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Saturday, August 6, 2011

U.S. loses AAA credit rating

U.S. loses AAA credit rating. Standard & Poor’s was severely critical of the American political process in its press release announcing the lowering the US credit rating to AA+. Further, Standard and Poor’s put the U.S. on notice that the long term rating could be lowered to AA within two years if spending reductions are less than the agreed to amount, or new financial pressures result in higher general government debt.

Standard and Poor’s but the blame squarely on the dysfunctional American political system.
Here is part of their announcement:

“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 policy making uncertainty, consistent with our criteria…”

They also said, “The political brinksmanship of recent months highlights what we see as America's governance and policy making becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in
the debate over fiscal policy. Despite this year's wide-ranging debate, in our view, the differences between political parties have proven to be extraordinarily difficult to bridge, and, as we see it, the resulting agreement fell well short of the comprehensive fiscal consolidation program
that some proponents had envisaged until quite recently. Republicans and Democrats have only been able to agree to relatively modest savings on discretionary spending while delegating to the Select Committee decisions on more comprehensive measures…”

In other words its time for the Democrats and Republicans to act like adults and not children and produce a workable solution to the American debt problem. Here is the complete Standard and Poor's report.

Stay on Track,Money Magazine Hoss

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