Obligatory Post: S&P downgrades U.S.A. to AA-plus with negative outlook (Updated)

I’m frantically looking for the word “unexpected” in any of the news stories posted within the last 20 minutes since the news broke about Standard & Poor’s downgrading the United States’ credit rating from AAA to AA-plus. Not finding that particular word anywhere.

Scroll down for the Standard & Poor’s rationale. Three hudred fifty seven news articles indexed by Google News so far. From the Washington Post.

Standard & Poor’s announced Friday night that it has downgraded the sterling U.S. credit rating for the first time.

The move came even though the Treasury Department said that it had found a math error in the firm’s calculations of deficit projections, according to a person familiar with the matter.

S&P decided to lower the AAA rating, held by the United States for 70 years, to AA+ after a bipartisan debt deal signed into law this week failed to assuage concerns about the nation’s growing spending.

The Wall Street Journal, with my emphasis in bold.

Standard & Poor’s took the unprecedented step of downgrading the U.S. government’s “AAA” sovereign credit rating Friday in a move that could send shock waves through global financial markets and potentially undermine world economic growth.

In a press release, S&P, cut its top-notch long-term credit rating for the U.S. Treasury’s debt to AA+ with a negative outlook. It is the first time in modern history that one of the three main ratings firms has stripped the U.S. of its coveted AAA rating.

The Hill reported late this afternoon the Obama administration was expecting this, but was fighting the good fight.

Standard & Poor’s reportedly notified the Obama administration it planned to downgrade the nation’s credit rating Friday afternoon, only to pull back after being challenged on its analysis.

The credit rating agency is now revisiting its decision, and it is not clear whether a downgrade will still be in the offering, according to a CNN report.

Quoting a senior administration official, the network said S&P was off by “trillions” in its analysis, but that “it’s clear some people there still want to go forward” with the downgrade.

Forbes’ Steve Schaefer quoted Richard Lehmann as he tried to convince investors there was no way Standard & Poor’s would go out on a limb and downgrade the rating after Moody’s confirmed they were sticking with AAA.

“Moody’s has already ruled they won’t downgrade the U.S. and S&P is not going to leave themselves hanging out there alone,” says Richard Lehmann, publisher of the Forbes/Lehmann Income Securities Investor newsletter. “It’s too competitive a marketplace.”

The ratings agency would catch hell for going out on a limb on its own and though Lehmann had not heard the downgrade rumor, he said “it sounds like something put out there by someone who wants the market to go down even further.”

Whoops.

AP at Hot Air figures this will make those in Washington get serious about the debt and deficit issue now. I’m not so sure.

S&P’s full report, and their rationale (in part), with my emphasis in bold. Hat tip to Zero Hedge.

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.

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.

31 replies
  1. PatRiot
    PatRiot says:

    These guys are just saving face (and becoming more realistic).? I? mean really.? How can a country carrying this much debt truly rate a AAA status?
    And if the majority of countries have lower ratings, is AA+ rally that bad?

  2. sammy22
    sammy22 says:

    Sorry I missed the second part of the phrase : “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”.? Check it out, it did not say AND, but OR.

    • Dimsdale
      Dimsdale says:

      If they insist on outspending their budgets, of course the only alternative is to scrounge up revenue.? That is a blanket statement of fact.? They consistently said that to maintain the AAA rating, we have to cut the spending.? I have heard it repeatedly in the run up to the deadline.

  3. essneff
    essneff says:

    I’m usually wrong when it comes to Wall Street, but didn’t the meltdown of?the stock market??this week signal this?downgrade? I find it fascinating that treasury debt actually went?up in price?in the face of this, treasury bills pay absolutely nothing, the 5 year note was at a yield of 1.25% today…..?$ flooded into?treasury securities as a “safe haven” hours before the?S&P?downgrade..strange days indeed, ?most peculiar Momma!!?????

  4. Dimsdale
    Dimsdale says:

    This is the kick in the pants the government needs.? Like small children, some tough love needs to be administered to elicit good behavior.? They kept saying, over and over, that the debt limit increase would do little for the credit rating; we have to stop the stupid spending.? We got a little, but the president’s veto and the Democrat controlled Senate kept it from happening.
    ?
    Stupid come in Costco sized portions in Washington.

  5. Kelly
    Kelly says:

    Goodbye America….Welcome U.S.S.R.? Everyone has Monday Morning Quarterback syndrome…Tea Party is our only hope!!!! LETS RALLY!!!

  6. Tim-in-Alabama
    Tim-in-Alabama says:

    Great photo accompanying this post. It’s really fitting and would make a great profile pic for the nutroots, astroturfing, Soros-funded commenters who skulk about here. O’Bama’s chickens are finally coming home to roost with this downgrade. Republicans tried to pass Cut, Cap and Balance, but Barry kept mewling he would veto anything that didn’t give him a blank check until after the 2012 elections. His jihadist enabler, Dr. No from Nevada, kept anything from moving in the Senate where he’s rightfully earned the infamy for running the most slothful, partisan Senate in world history. No matter how much co-ordinated hate is projectile vomited forth by the Dems blaming the TEA Party, most Republicans were on the right side of this issue, and the GOP should see big gains in the 2012 elections if they “stick to their guns.” After all, God created the GOP to save mankind from Democrats.

  7. JollyRoger
    JollyRoger says:

    So this is what hope and change look like!?? If we can’t find anyone to buy our bonds, Barry will just have to raised taxes- doh! I mean REVENUES!

  8. winnie888
    winnie888 says:

    It appears that S&P put the responsibility for the credit downgrade squarely on those who are addicted to spending:? Obama & his democrat terrorists in the Senate.? Sure, he got his debt ceiling increase to get him through the next election but at what cost???
    Can we pleeeeeeeease start placing blame where it belongs?? Eventually, he will be gone from office and even the most die-hard lefties will be left holding this bag of Obama debt along with those of us who pointed out his irresponsible “leadership”.? Can anyone even seriously try to blame Bush for this?

  9. crystal4
    crystal4 says:

    S&P repeatedly sites GOP for the downgrade.
    Great job TP Freshmen!
    Wall Street Journal: ?A spokesman for Rep. Eric Cantor, the House GOP majority leader, declined to comment friday night”.
    (Ok, now we get to hear how the S&P is a “lefty” organization-lol.)
    ?

      • Dimsdale
        Dimsdale says:

        That was supposed to say “How about citing those references, crystal.? I would love to read them.”
        ?
        That looks really bad, and I apologize for any offense!

      • crystal4
        crystal4 says:

        LMAO!
        First I was like “What?? That’s not like him, it’s more like Tim-Zero from Bammy” Then I read explanation below.
        You may be a tea-flavored kool-aide drinker, Dimsdale, but you are never that disrespectful!

      • crystal4
        crystal4 says:

        (I believe i posted this before… from S&P’s press release:
        […]Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act.
        http://blogs.wsj.com/marketbeat/2011/08/05/sp-downgrades-u-s-debt-rating-press-release/

      • winnie888
        winnie888 says:

        Also from your link, crystal4:
        ? 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.
        ? The outlook on the long-term rating is negative. We could lower the?long-term rating to ?AA? within the next two years if we see that less?reduction in spending than agreed to, higher interest rates, or new fiscal?pressures during the period result in a higher general government debt?trajectory than we currently assume in our base case.
        “In addition, the plan envisions?only minor policy changes on Medicare and little change in other entitlements,?the containment of which we and most other independent observers regard as key?to long-term fiscal sustainability”

      • Dimsdale
        Dimsdale says:

        Also, “Our lowering of the rating was prompted by our view on the rising public?debt burden and our perception of greater policymaking uncertainty, consistent?with our criteria (see refs).”
        ?
        ?
        The statement effectively says that they predict the profligate spending to continue, but now there is resistance to just reflexively raising taxes to cover said spending.? They didn’t say this was bad, necessarily, but neither did they say that continued wild spending was a good thing.?
        ?
        I wonder if they can do a rating on the ?bama administration…

    • winnie888
      winnie888 says:

      I don’t know what you’re reading, crystal4, but everywhere the quotes are referring to “debt burden”.? Seems that the only ones who wanted to raise the debt ceiling and put off cutting spending were Obama & his crew.? But I guess the revisionist history is going to start in less than 24 hours of the downgrade. *shock & awe*?

  10. Jeff S
    Jeff S says:

    Remember when the Dems took over Congress in ’07, they talked about “Pay-go”.? Well that was about 5 trillion dollars of debt ago, nice job.? You may say Bush spent a lot but how much of that spending was in his last two years when the Dems controlled the purse.? GOP should have had a stronger spine and held out, the rating was going to be downgraded anyway, there is too much debt.? If Obama gets another 4 years we are doomed, now that he doesn’t have to worry about re-election unless he tries to pull a Bloomberg.? I mean he doesn’t care about the constitution anyway.

  11. TomL
    TomL says:

    Lets put the blame where it belongs. Tubo Tax Tim and the Campaigner and Chief. They were in contact with the ratings agencies? and then TTT and zero said there would be no downgrade so they let legislation pass that ultimately led to the downgrade.? They lied.? Cap,Cut and Balance is looking pretty good right now.

  12. GdavidH
    GdavidH says:

    #1- It’s Bush’s fault!

    #2- Bawny Phwank said don’t worry about it!

    Wake me when it’s time to line up for toilet paper.? ?

  13. Plainvillian
    Plainvillian says:

    I so fondly remember those halcyon days culminating in the self-aggrandizing? and stentorian promises of peace, prosperity and growth before those faux Greek Columns? since? we had elected a true philosopher/intellectual as president.? He surrounded himself with a coterie of advisers, all of whom were the smartest most noble person in any room.? Everything is so much better now, right?? S & P is just too ignorant to comprehend such splendid planning.?

  14. Lynn
    Lynn says:

    Forget the blogs read the report.
    http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&blobcol=urldata&blobtable=MungoBlobs&blobheadervalue2=inline%3B+filename%3DUS_Downgraded_AA%2B.pdf&blobheadername2=Content-Disposition&blobheadervalue1=application%2Fpdf&blobkey=id&blobheadername1=content-type&blobwhere=1243942957443&blobheadervalue3=UTF-8
    It almost puts all the blame on the WH Adm. and not working with Rep. to bring down spending and debt. There is only one tiny instance in whole report that could blame Rep. for anything. If the WH was not to blame why do they question the figures?

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