Standard and Poor’s Downgrades U.S. Debt Rating to AA

Friday, August 5, 2011

Citing the increased burden of rising Federal debt, rating agency Standard & Poor’s downgraded the United States’ long term from AAA to AA for the first time in U.S. history.

Standard and Poor’s is one of three major agencies that assign grades the credit of companies and governments. Last week, during the heat and the rancor of the debt debate in Washington, the agency had threatened the downgrade if the U.S. did not reduce the Federal debt by at least $4 trillion over the next decade.

Instead, Congress passed and President Obama signed, a deal to reduce the debt by at least $2.1 trillion over the next decade.

Treasury Department officials blamed the downgrade on “a serious mathematical error in a draft of the downgrade announcement,” which was given to the government Friday afternoon. The officials argued Standard and Poor’s inadvertently added in $2 trillion to its projection of the Federal debt, significantly overstating the problem confronting the government.

The downgrade comes at an enormous cost. Downgrades of other entities backed by the government such as Fannie Mae and Freddie Mac, the government-controlled mortgage companies, would likely be downgraded, raising rates on home mortgage loans for borrowers.

Dozens of counties and even a handful of states including Maryland, Virginia, and New Mexico, could also be downgraded because of their local economies’ have strong ties to Washington.

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18 Responses to Standard and Poor’s Downgrades U.S. Debt Rating to AA

  1. Robyn says:

    I just had my student loans sold to Sallie Mae. F*ck!

  2. Scott Dancer says:

    The debt ceiling should’ve been raised back in December or January. Why did Obama wait?

    Now the influence of the Tea Party is being felt and everyone will be effected. I expect my credit card interest will go up. This is very serious for someone who lives on commissions. And if mortgage interest rates go up too, I may not be able to remain in real estate.

    In all honesty, I’ve just about reached the point where I am seriously considering a permanent move to Australia. I’ve had it with the USA.

  3. Adirondacky says:

    The Treasury and the White House can spin this until hell freezes over but the fact is, Obama said the Tea Party-driven debt deal would prevent this from happening and lead to hiring. Well, the DOW dropped more than 500 points on Thursday and now this downgrade on Friday. We need to accept the fact that America is in decline and the people we elected to run this country haven’t a clue how to fix the sinking USS America.

  4. JollyRoger says:

    They know how to fix it. They could have started the process in December. But knowing how, and doing…. those are vastly different things.

  5. Estacada says:

    The political ramifications of the downgrade are twofold:

    1.) it will mark the end of the influence of the Tea Party on politics in America
    2.) it will cement President Obama’s fate as a one term president

    So, depending on what side of the political aisle you shit, there’s something to celebrate. Personally, I do not look forward to paying higher credit card interest.

  6. Carpe Diem says:

    It’s the Tea Party’s economy now.

  7. Abbey Peripatetic says:

    Speaker Boehner chirped the other day before he sent Congress on their 5 week vacation that the Republican Party and the TEA Party “got 98% of what we wanted.”

    He pronounced the debt deal a “victory.”

    But it is worth noting that John Chambers of Standard & Poor’s also credited the Republican Party with refusing to raise revenues as a major reason for the historic downgrade.

    I’m sure Mr. Boehner is too drunk tonight to even know what happened but when he sobers up, I think it might be informative for someone to send this factoid along to the Speaker.

  8. STEEL TOE says:

    Wait until the all-important Asian stock markets open Monday. Sunday evening for the USA.

    No wonder Obama high-tailed out of the White House for Camp David. I’d bet any of you $100 dollars Obama is hitting the bong this weekend to drown out the noise.

    If I fucked things up this badly, I would do the right thing and tell the American people I wasn’t seeking reelection. President Johnson had enough honor to exit when it was time. But not Obama. He will run for reelection and he will be defeated.

  9. Robyn says:

    Steel Toe,

    I won’t take your bet but I will be watching Bloomberg on Sunday night for when the Asian and European markets open. It is going to be an ugly day Monday morning.

  10. fran says:

    It’s about time. We’ve lived in this pretend financial bubble lie for too long. We have earned this bad lowered credit rating, and probably deserve a worse rating.
    We are $14.5 trillion in debt for cripes sake!
    We really should thank Bush 2 for this. He & the GOP had 8 years of drunken spending.
    Have we had enough wars yet?

  11. Nigel Karsten says:

    I realize what a shock this must be for Americans accustomed to their “AAA” credit rating since 1917 but I can’t help but wonder how Timothy Geithner can say Standard and Poor’s is off by two trillion dollars that is unaccounted for?

    A $2,000,000,000,000 accounting error?

    Such an amount is so enormous that US Treasury had to know about this in advance which could explain how the markets collapsed as they did yesterday. The figure had to already all priced in. If it is any consolation, I’m sure the UK stock markets will further tank Monday on this news. I suspect we’re now headed for a global recession.

  12. feminazi says:

    Even China, the largest foreign holder of United States debt, said Saturday that Washington needed to “live within its means.” It’s a message that isn’t resonating with lawmakers. You don’t cut taxes on the rich and then go to war. Obama inherited this messy economy from Bush but what has he done to stop the wars in Iraq and Afghanistan? Nothing, I say. In fact, he’s added two of his own and then, inexplicably, he extended the Bush era tax cuts. The U.S. is starved for revenue.

  13. Brigadoon says:

    So does this mean my credit card interest is going up now? I swear, I cancel all of my cards and pay cash. If I don’t have the money, I won’t buy it. Obama needed to put the basketball down earlier in the year and deal with the debt ceiling before everything unraveled. He’s too passive-aggressive to be president.

  14. Chad Lebanon says:

    Brigadoon – I don’t think banks will raise your interest. When they did it in 2008, millions of American credit card holders paid off their credit cards and cancelled their cards. I was one of them. I am almost debt-free today and let me tell you, this is true freedom.

    I do think the USA will be forced to live within our means for the first time ever and maybe this is a positive step for our survival?

  15. Rachel says:

    Nigel is right. A $2 trillion dollar error is simply impossible. If the S&P downgraded the USA, I wonder how long until Moody follows in their footsteps and gives us the heave-ho? Already, China issued remarks as if Washington is populated with a bunch of whining brats and you know what? China is correct. The debt ceiling debate was an embarrassment and now the entire world sees just how dysfunctional the US government is, at a time when we should be working together.

  16. Woodcliffe says:

    Americans need to wake-up and see this downgrade for what it is. If a global recession is taking hold, and I think it is, then cash is king and the key to your survival. Ditch the credit cards, pay off your debt and save, save, and save. The dollar is losing value on a daily basis, as gold now sells for more than $1,600 an ounce. If hyper-inflation takes hold, the prices we’re paying today will look like the good old days by comparison. Put your money under your bed — not in the bank.

  17. Matteo says:

    S&P Warns of a Second Downgrade

    One day after lowering the nation’s platinum triple-A credit rating, Standard & Poor’s analysts warned Saturday that the U.S. government could face a second downgrade if the economy continues to struggle and the government fails to make the cuts outlined in the debt ceiling agreement.

  18. Christine says:

    I’ve been struggling..Since 5% deduction in pay 3 yrs ago…wtf. Ive had to use one credit card to buy food and gas for myself and my 3yr old son all the while Medical insurance & gas has gone up and continuing. Im so sick of all this. Always seems to end up hurting the people. ugh..

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