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As the politicians play chicken with the debt ceiling, credit rating agencies are beginning to downgrade America’s credit, a move that could have far-reaching implications. On Thursday, Standard & Poor warned America that there is a one-in-two chance it could cut the United States’ prized triple-A rating unless a deal on the government’s debt ceiling is worked out soon.
“Today’s CreditWatch placement signals our view that, owing to the dynamics of the political debate on the debt ceiling, there is at least a one-in-two likelihood that we could lower the long-term rating on the U.S. within the next 90 days,” the agency said in a statement on Thursday.
Although the deadline to raise the ceiling is August 2nd, it could come before that date depending on interest rates and a variety of other factors.
“We have also placed our short-term rating on the U.S. on CreditWatch negative, reflecting our view that the current situation presents such significant uncertainty to the U.S.’ creditworthiness,” the statement read.
“If an agreement is reached, but we do not believe that it likely will stabilize the U.S.’ debt dynamics, we, again all other things unchanged, would expect to lower the long-term ‘AAA’ rating, affirm the ‘A-1+’ short-term rating, and assign a negative outlook on the long-term rating,” said S&P.
Republicans refuse to raise the debt ceiling unless they get some real meaningful cuts. Even though one does not really have much to do with another. Even though, under the last president, the debt ceiling was raised seven times and no Republican objected over spending cuts or other nonsense then.
Speaker John Boehner (R-Ohio), meanwhile, reiterated his position that the administration’s approach was insufficient for resolving the nation’s debt problem. “He continued to press the White House to get serious about reducing spending in a meaningful way,” a Republican aide said.
Treasury Secretary Timothy Geithner has warned lawmakers that the government was “running out of time” to negotiate. Office of Management and Budget committee chair Jacob Lew, along with top economic adviser Gene Sperling “walked through proposals for getting savings out of health care entitlement programs, tax expenditures and budget process changes,” according to a Democratic official familiar with the talks.