S&P Threatens US Rating On Budget Matters

S&P has become the latest organization, economist, or politician to warn Congress and the Administration that a lack of firm decisions to lower the deficit will eventually ruin the country’s finances.

S&P reaffirmed its current rating for US sovereign debt, but that was the best news.

S&P wrote:

• In our view, the credit strengths of the U.S. include its resilient economy, its monetary credibility, and the U.S. dollar’s status as the world’s key reserve currency.
• In our opinion, the U.S.’s credit weaknesses, compared with higher-rated sovereigns, include its fiscal performance, its debt burden, and what we perceive as a recent decline in the effectiveness, stability, and predictability of its policymaking and political institutions, particularly regarding the direction of fiscal policy.
• We are affirming our unsolicited ‘AA+/A-1+’ sovereign credit ratings on the U.S.
• The negative outlook reflects our opinion that U.S. sovereign credit risks, primarily political and fiscal, could build to the point of leading us to lower our ‘AA+’ long-term rating by 2014.

Douglas A. McIntyre