Think The Debt Deal Avoided A Downgrade? Perhaps Not

Sorry, it wasn’t the debt limit, but the direction our spending has been going–up, and still going up, though at a slower rate–that was the issue in the credit rating downgrade:

Though the bill removes the threat of imminent default by raising the national debt limit enough to last until 2013, its cuts are only about half the $4 trillion in savings that ratings agencies Standard & Poor’s and Moody’s have said would be enough to confirm the country’s triple-A rating with a stable outlook.

Adding a sense of immediacy to downgrade anxieties, S&P said in mid-July there was a 50-50 chance it would cut U.S. ratings in the next three months if lawmakers failed to craft a meaningful plan to cut the nation’s deficit.

S&P could downgrade U.S. ratings soon after the bill is signed by President Barack Obama, given that the agency will have all the information it needs to make a decision.

Such a move would likely cause both U.S. Treasury and stock prices to fall.


Adding to the cloud of uncertainty, the other major ratings agencies, Fitch Ratings and Moody’s Investors Service, have been less severe than S&P and will await further developments before deciding whether to downgrade the United States.

Moody’s has also said the United States could keep its top-notch credit rating for now, despite the “limited magnitude” of the deficit-reduction plans being discussed in Washington.

But it did warn in a report that the confirmation of the Aaa credit rating is likely to come with a negative outlook, meaning there is a risk of a downgrade in the medium term.

Obama and the Democrats may think they’ve dodged the bullet, but they really haven’t. The basic problems still exist, they’ve just been given a temporary band-aid.

I fear we’ll have to wait for a new Congress and hopefully a new President in 2013 before we can really turn things around… which means that conservatives can’t afford to sit at home on Election Day 2012 just because the “wrong” candidate got nominated.


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About Conservative Wanderer

Conservative Wanderer is currently Editor-in-Chief of That's Freedom You Hear! That means anything that goes wrong can be blamed on him. Previously he was a contributor to the PJ Tatler.
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