The United States Loses Its AAA Rating
S&P said in its report issued late on Friday: “The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilise the government’s medium-term debt dynamics.
“More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges.”
The agency said it might lower the US long-term rating another notch to AA within the next two years if its deficit reduction measures were deemed inadequate.
S&P noted that the bill passed by Congress this week did not include new revenues—Republicans had staunchly opposed President Barack Obama’s calls for tax rises to help pay off America’s deficit.
The credit agency also noted that the legislation contained only minor policy changes to Medicare, an entitlement programme dear to Democrats.
“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,” it added.
