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.
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.”
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.
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.