S&P may downgrade US credit even after debt ceiling deal
S&P’s statement makes it official that all three top credit raters, including Moody’s and Fitch, are considering downgrading the current triple-A rating. Now, however, S&P adds that they are likely to downgrade the rating even if the debt ceiling is raised, citing that a Capitol Hill deal on the ongoing economic crisis might not necessarily stabilize the financial woes ravaging the country.
Thursday’s announcement from S&P says that there is a “substantial likelihood” of downgrading the US’ rating, which could come by the end of this month, even. S&P adds that, if a downgrade doesn’t happen before August, there is a 50 percent chance it will occur before summer’s end if lawmakers fail to find a solution to the debt dilemma. Even then, however, a downgrade would still be possible.
“The positions of the administration and the Republican leadership are still very far apart,” S&P Managing Director John Chambers says to the Washington Post. “The tone of the debate has made us wonder whether a compromise can be achieved.”
The statement from S&P itself reads that “Despite months of negotiations, the two sides remain at odds on fundamental fiscal policy issues.”
The US Treasury has given lawmakers an August 2 deadline to raise the debt limit, yet five consecutive days of discussions between President Barack Obama and members of Congress have proved unfruitful.
Speaking from Washington on Friday morning, President Obama offered an update on the state of discussions, noting that despite the delay, wheels are in motion.
“I think we should not even be this close to a deadline on this issue, this should have been taken care of earlier,” said the president.
“What I’ve said to the members of Congress is you need to over the next 24 to 36 hours to give me some sense of what your plan is to get the debt ceiling raised,” added Obama. “We are obviously running out of time . . .Show me a plan.”
The president adds, however, that he expect “we’ll see this log jam broken” over the next couple of days.
Obama repeatedly stressed that media-manipulated sound bytes have turned Congress into a playing field for posturing and that the debt ceiling has been raised numerous times in the past and should not have become such a spectacle in 2011.
The president also emphasized that millionaires and billionaires must be ready to make sacrifices and suggested closing corporate loopholes to avoid giving unnecessary tax breaks to those that don’t need them.
“I am confident that we can not only impress the financial markets but more importantly we can impress the American people that this town can actually get something done once in a while,” said Obama.
The threat from S&P comes only a day after Moody’s also said they were contemplating a downgrade of the US credit rating. Standard and Poor’s have been alluding to downgrading the US credit since April, when at the time they said the likelihood was one-in-three.