S&P Downgrades U.S. Credit Rating From AAA for First Time in History

Credit rating agency Standard & Poor's on Friday downgraded the United States' credit rating for the first time in the history of the ratings.

The credit rating agency said that it is cutting America's top AAA rating by one notch to AA-plus. The credit agency said that it is making the move because the deficit reduction plan passed by Congress on Tuesday did not go far enough to stabilize the country's debt situation.

A source familiar with the discussions said that the Obama administration feels the S&P's analysis contained "deep and fundamental flaws."

S&P said that in addition to the downgrade, it is issuing a negative outlook, meaning that there was a chance it will lower the rating further within the next two years. It said such a downgrade to AA would occur if the agency sees less reductions in spending than Congress and the administration have agreed to make, higher interest rates or new fiscal pressures during this period.

Read more at foxnews.com

========================================================

By Jamie Klatell, The Hill

The White House reacted to the Standard & Poor's downgrade of the U.S. credit rating by calling for more bipartisan compromise to "put our nation on a stronger fiscal footing."

But the administration didn't miss the chance to say, in essence, "I told you so."

"Over the past weeks and months the President repeatedly called for substantial deficit reduction through both long-term entitlement changes and revenues through tax reform, with additional measures to spark jobs and strengthen our recovery," press secretary Jay Carney said in a statement.
"That is why the President pushed for a grand bargain that would include all of these elements and require compromise and cooperation from all sides."

S&P, the credit rating firm that reduced the nation's rating from AAA to AA+, said the recent plan to raise the debt limit while reducing the debt "falls short" of its expectations, but also offered broader condemnations of America's political process.

Read more at thehill.com

========================================================

By Margaret Talev and Brian Faler, Bloomberg

The downgrade of the U.S.’s AAA credit rating by Standard & Poor’s darkens President Barack Obama’s re-election chances while also damaging members of Congress from both parties as they prepare for the 2012 campaign, political analysts said.

With Obama’s job-approval rating at 48 percent and an all- time high of 82 percent of Americans giving Congress negative marks in a New York Times/CBS News Poll taken this week, the downgrade will hurt the president and lawmakers by fueling economic uncertainty, possibly raising interest rates and wounding national pride, analysts said.

“Americans expect to be No. 1 at everything,” said Republican strategist Ron Bonjean. A downgrade is “a great insult and humiliating to the country.”

Added Bonjean, “If this brings rising interest rates on credit cards and mortgages, it is going to send a political shockwave throughout the system, and there will definitely be a ‘throw-the-bums-out’ mentality.”

Read more at bloomberg.com

======================================================

By Henry C. Jackson, The Associated Press

After the first-ever downgrade of the U.S. government's credit rating, the White House said on Saturday that President Barack Obama believes it's clear Washington "must do better" in tackling the deficit. While Republicans and Democrats traded blame over Friday's move by Standard & Poor's to lower its AAA credit rating, a statement from White House press secretary Jay Carney was muted in tone and did not refer directly to the downgrade.

Administration officials privately called S&P's analysis flawed. But Obama himself refrained from comment as he spent the weekend at Camp David.

Read more at ajc.com