Even though the United States waddled towards a debt ceiling resolution/compromise, Standard & Poor's made good on its threat to downgrade the U.S.'s credit rating and lowered it from the AAA rating to a AA+. S&P says the political parties didn't do enough to address our debt problems and ABC News reports, "The move could cost the government and ordinary consumers by jacking up interest rates the U.S. must pay on its $14.4 trillion debt and a host of rates consumers for items such as mortgages, car loans and credit cards." But the Treasury Department sugests that S&P's math is wrong!
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 stabilize 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 to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011...
Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics any time soon.
You can read S&P's position on the downgrade (PDF), but the Wall Street Journal reports that S&P let the Treasury Department know a downgrade was on the way and presented its report to the White House, "After two hours of analysis, Treasury officials discovered that S&P officials had miscalculated future deficit projections by close to $2 trillion. It immediately notified the company of the mistakes. S&P officials later called administration officials back to say they agreed about the mistakes, though they didn't say whether it would affect the rating. White House officials remained waiting Friday evening to see what the company would do."
Um, thank goodness S&P announced this after the stock markets closed?
