S&P downgrades U.S. credit rating
August 5th, 2011
09:44 PM ET

S&P downgrades U.S. credit rating

[Updated at 9:44 p.m. ET] Referring to the Obama administration's contention that Standard & Poor's analysis of the government's finances was off by about $2 trillion, a Treasury Department spokesperson said: "A judgment flawed by a $2 trillion error speaks for itself."

The Standard & Poor's rating agency announced Friday evening that it has downgraded the U.S. credit rating to AA+ from its top rank of AAA.

On Friday afternoon, hours before S&P publicly announced the downgrade, the agency revealed its plans to the Obama administration and sent an analysis to the Treasury Department. The senior administration official said the analysis inflated U.S. deficits by $2 trillion.

Treasury analysts contacted S&P and challenged the analysis, and S&P acknowledged the mistake, the official said. But S&P said it still would stick with its decision to downgrade the United States' credit rating, according to the official.

"This is a facts-be-damned decision," the senior official said. "Their analysis was way off, but they wouldn't budge."

The official the administration can do nothing now but hope that S&P's decision and analysis faces outside scrutiny.

"These guys make Congress look good," the official said of S&P.

[Updated at 8:59 p.m. ET] Credit rating agency Standard & Poor's on Friday downgraded the credit rating of the United States, stripping the world's largest economy of its prized AAA status.

In July, S&P placed the United States' rating on "CreditWatch with negative implications" as the debt ceiling debate devolved into partisan bickering.

To avoid a downgrade, S&P said the United States needed to not only raise the debt ceiling, but also develop a "credible" plan to tackle the nation's long-term debt.

In its report Friday, S&P ruled that the U.S. fell short: "The downgrade reflects our opinion that the ... plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics."

S&P also cited dysfunctional policymaking in Washington as a factor in the downgrade. "The effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges."

iReport.com: What does this mean for the U.S. economy? Share your thoughts on video.

[Initial post, 7:15 p.m.] The Standard & Poor's rating agency served the Obama administration with notice Friday afternoon that it planned to downgrade the U.S. government's AAA credit rating, an administration official told CNN.

But S&P has yet to make its ruling public, and the source told CNN the agency is reconsidering after the administration challenged S&P's analysis of the government's finances.

The source, a senior official involved in the discussions, said the agency was off by "trillions" in its economic model and was now working to revise its analysis.

S&P did not return repeated calls for comment.

The official described the talks as a "moving target" and said "it's clear some people there still want to go forward" and downgrade U.S. debt.

Rumors swirled for most of the day Friday that S&P was preparing to make its move. But even several hours after the market close, official notice had yet to materialize.

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soundoff (678 Responses)
  1. Paul

    @ Ann: How can you say that blacks have it tough here when our president is black, PRESIDENT Obama, who was elected by a MAJORITY vote? Do you think he would have been elected if he were not black? Bush wasn't a very good president either. Bush was running $200 – $300 billion deficits. But President Obama raised it to $1+ trillion deficits and that's where things really went down the drain.

    August 6, 2011 at 3:57 am | Report abuse |
    • han

      There you go again. Lying. Bush ran the deficit by 5 trillion while Obama did only 1.7 trillion in his term. Blame bush not obama and get your facts straight!

      August 6, 2011 at 4:06 am | Report abuse |
    • Paul

      During Bush's 8 years in office the national debt went from $5.768 trillion to $10.626 trillion. In only 2.5 years, Obama took us from $10.626 trillion up to our current $14.577 trillion, much more than the 1.7 trillion you are claiming. But I will admit I was also off on how much Bush put us in the hole. The fact of the matter is Republicans and Democrats are playing a dangerous game. Republicans lower taxes thinking they can get the Dems to cut spending. Instead, Democrats RAISE spending, thinking they can get Republicans to raise taxes. In choosing between the two, I favor cutting spending.

      August 6, 2011 at 4:40 am | Report abuse |
    • Bob

      Okay, Okay, Okay. We got it! We fell off the horse (AAA)! You've reported the fact exhaustively; you've done Wall Street; you did the politics; higher interests rates, etc., etc.. Now tell us, please, for something fresh and interesting: How do we get back on the horse? What should/must the President do? What should the Congress do? What should the American people do? I'm now about as knowledgeable as you are about what has happened. Now for both of us, short of my having to look elsewhere for something I can use, get past the fact that something you told us about for months has now occurred. Get on with it. Thanks for ordinarily exciting thorough coverage, but at times you become a broken record.

      August 6, 2011 at 3:12 pm | Report abuse |
    • John

      Obama is a joke. I think he should resign. He does not have any control, no one respects him, he does not know what he is doing.

      August 6, 2011 at 7:18 pm | Report abuse |
    • Paul

      We get back on it by letting the Bush tax cuts expire for those making over 250K and cutting spending such that we cut the deficit by at least $2 trillion. We make the spending cuts take effect NOW instead of 5-6 years from now. Enact legislation stating that any new spending program needs to be projected out at least 50 years rather than the current 10 year requirement. Finally, Social Security and Medicare desperately need to be reformed. We have to cut benefits and/or extend the retirement age.

      August 7, 2011 at 2:54 am | Report abuse |
  2. Bill

    S&P lost all credibility 2 years ago when they had all those worthless CMO's rated A. In my opinion S&P is incompetent and no one should pay any attention to their flawed ratings.

    August 6, 2011 at 7:53 am | Report abuse |
    • Olivia54984

      Has anyone considered S&P is a for profit company, a division of McGraw Hill? Is no one following the money trail here, especially given the White House is stateing that the rating mechanism is flawed? Come on people! Wake up!

      August 6, 2011 at 6:08 pm | Report abuse |
    • John

      Obama is systematically destroying America. He is a muslum and hates us.

      August 6, 2011 at 7:19 pm | Report abuse |
  3. Confucius

    @Paul: Nice way to compromise. How about increasing revenue while cutting spending. The government is not our p_I_m_p. As long as the bloods and the crips of DC maintain their game of one up the other we will never see improvements. One guy I spoke with a long time ago claimed men could do much better at governing themselves instead of God. Well.... lol great job we're all doing eh? Pride comes before the fall.

    August 6, 2011 at 9:59 am | Report abuse |
  4. Dreamtime

    "The one aim of these financiers is world control by the creation of inextinguishable debts."
    Henry Ford

    August 6, 2011 at 10:07 am | Report abuse |
  5. Eyes Wide Open

    Don't kid yourself, the U.S. credit rating should have been downgrade way before this. I give S&P credit to doing what is right in the face of enormous pressure from the U.S. Government and Wall Street. It is time for the U.S. Government, Banks and Citizens who are living on debt to realized you can not grow your economy on borrowing and printing money. Eventually you have to pay the fiddler, sorry that time is here now.

    August 6, 2011 at 10:09 am | Report abuse |
  6. Roy Rogers

    I'm afraid that S&P is correct to downgrade. I do not think that the government has the ability to make good on her loans. That state is indicated by a AAA rating. The US is no longer in that category. Alas!

    August 6, 2011 at 10:43 am | Report abuse |
  7. bobcat2u

    This really makes for a sad commentary. Now the Chinese government is chastising us over our inability to take care of the business at hand. They haven't cut us off completely, but they did say the days of borrowing willy nilly was over. I hope our illustrious "lawmakers" are happy now. They've made the US the laughing stock of the world. Do you think our allies can ever take us seriously again ?

    August 6, 2011 at 12:59 pm | Report abuse |
  8. Joshua

    for all u American haters who want the downfall of this country. Just remember if America falls so do you.

    August 6, 2011 at 3:03 pm | Report abuse |
  9. John

    It is disgracful that Obama allowed and promoted this to happen to us. He is the worst President ever.

    August 6, 2011 at 7:16 pm | Report abuse |
  10. Bo

    It's funny how cnn and other left-wing "news" stations distance obama from the economic situation and try to shield him from any blame. This pretend president has spent more money in two and a half years than any president in U.S. history. If this had happened with George Bush in office every other word out of wolf blitzers mouth would be bush. obama is in office and will get the blame when the election debates start with the Republican nominee and will be great ammo to get this commie out of the white house.

    August 6, 2011 at 7:50 pm | Report abuse |
    • David

      The only blame obama gets is for trying to come together with those idiots know as republicans.When they show people that they don't care about elderly people loosing their checks,medicare/medicaid,what does that say for their status.I'll tell you,it STINKS!This country was taken down by that other idiot bush,then for some idiotic reason people voted him back in to finish tearing down the country which he did in dramatic fashion,thats republicans for you.It's happened everytime one was in the white house,wat a drag?

      August 6, 2011 at 8:36 pm | Report abuse |
  11. joshuagamen

    they didn't downgrade the debt as bad as it really is. just like they didn't do with the CDO's before the housing market crashed. betcha the banks aren't betting on us treasuries going up..

    http://joshuagamen.com/2011/08/05/here-comes-qe3-dow-drops-500-points-in-biggest-loss-since-that-week-we-all-remember-in-2008/

    August 6, 2011 at 8:18 pm | Report abuse |
  12. David

    Why is it ,that these stupid Republicans won't stop looking at the color of the President,and start caring and giving a dam about the people of the U.S. and work with the President,which he have been asking them to do since he been in office.They've refused time and time again,and their smiling now the the economy is worst than ever,just what they wanted.To vote for people like the Republicans,turns my stomach,and they turns their back on every individual that put them were they are today,simply because,they do not care about them or anyone but themselves.Their idiots,and i hope it all slaps them in the face,then i'll be smiling!!!

    August 6, 2011 at 8:29 pm | Report abuse |
    • Paul

      Believe me. The Republicans do NOT have a problem with President Obama's race. They just disagree with his policies. There are two opposing idealogies at play. Basically, Republicans want to cut spending rather than raise taxes, while Democrats and the president want to raise taxes.

      August 7, 2011 at 3:03 am | Report abuse |
  13. Dr. Sayini Devarajan

    Fox News Claims Obama's Birthday Party Was a "Hip-Hop BBQ" that "Didn't Create Jobs"! What's more, while the Prez was listening to hip-hop and eating BBQ with his friends, he didn't create one single job!

    August 6, 2011 at 11:30 pm | Report abuse |
  14. Omen

    I'd laugh at all the partisan bickering if it weren't completely sad. You all are doing exactly what they want us to do.. Look at party affiliation or skin color while they rob you blind.

    August 6, 2011 at 11:36 pm | Report abuse |
  15. George Patton

    @Omen: I couldn't agree more. These people should be booted out of our once glorious country.

    August 6, 2011 at 11:38 pm | Report abuse |
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