S&P reports misgivings over U.S. credit rating

tandard and Poor’s Ratings Services announced Monday that the United States continues to have a AAA credit rating, but the rating agency lowered its long-term credit outlook for the U.S. government. S&P cited U.S. budget deficits and government indebtedness as causes for concern.

According to Standard and Poor’s, the United States is among 19 sovereign nations that hold a AAA credit rating, signifying that the country is among the most credit-worthy nations.

But S&P has concerns, prompting the agency to lower its long-term credit outlook for the U.S. government from “stable” to “negative,” indicating that a change in the country’s credit rating might be on the horizon.
David Beers, the global head of sovereign ratings at Standard & Poor’s, spoke to reporters via teleconference.

“A negative outlook means that in S&P’s opinion, there is at least a one in three chance that over roughly the next two years, that we could lower the rating,” said Beers. “It also means, conversely, that there is, in the committee’s opinion, a two-thirds chance that the rating might not change.”

Standard and Poor’s says the U.S. economy is flexible and highly diversified, and that the nation’s monetary policies effectively support output growth, while containing inflation. But the agency warned that relative to its peers with the same AAA rating, the United States has what S&P considers to be very large budget deficits and rising government indebtedness.

The U.S. debt limit is more than $14 trillion, and the United States is on course to hit that figure in a matter of weeks. Under U.S. law, the Treasury Department cannot borrow more money unless Congress gives its approval by increasing the limit on borrowing.

Lawmakers are debating whether to raise the debt ceiling as they consider the federal budget. Earlier this month, a government shutdown loomed as Congress wrangled over a budget that was supposed to have been set last September.

Standard and Poor’s says the United States has not presented a clear strategy to address the nation’s long-term deficits and indebtedness.

S&P analyst Nikola Swann says that in the wake of the recent financial crisis, lawmakers have yet to agree on ways to address longer-term financial pressures and ways to reverse fiscal deterioration.

“If the Congress and the president do not succeed in coming to an agreement for a plan to consolidate fiscally on a multi-year basis that we think is credible by 2013, in that circumstance, with other things unchanged, we would expect to downgrade,” said Ms. Swann.

AAA is the highest credit rating. If the U.S. rating is downgraded, it could become more expensive for the United States to borrow money.

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