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.

FULL STORY
soundoff (678 Responses)
  1. Nick

    Someone was threatened with broken hands.

    August 5, 2011 at 7:27 pm | Report abuse |
    • michaelfury

      http://michaelfury.wordpress.com/2011/07/30/truth-crushed-to-earth-shall-rise/

      August 5, 2011 at 8:57 pm | Report abuse |
  2. DaveS

    S&P is "off" by "trillions"? Sounds like the President wants everyone to think that S&P confused the Greek budget numbers with the American ones.

    August 5, 2011 at 7:28 pm | Report abuse |
    • Brad

      Remember S&P are the same people that were rating the sub-prime bundles as AAA. Their opinion should be considered worthless.

      August 5, 2011 at 8:37 pm | Report abuse |
  3. glenn

    So What and Who Cares? Everything we have is borrowed from China anyway. Face it, it's to late to save this country!

    August 5, 2011 at 7:31 pm | Report abuse |
    • Nick

      9% is everything?

      August 5, 2011 at 7:35 pm | Report abuse |
    • jfan

      So America owes foreigners about $4.5 trillion in debt. But America owes America $9.8 trillion.

      Who owns America's debt?
      http://globalpublicsquare.blogs.cnn.com/2011/07/21/who-owns-america-hint-its-not-china/

      August 5, 2011 at 7:51 pm | Report abuse |
    • Angry at Gov

      China owns 8% of American debt. Americans own the majority of American debt.

      August 5, 2011 at 8:37 pm | Report abuse |
  4. Evan

    Who is monitoring these credit rating agencies to prevent corruption from occurring within, such as insiders in positions of corporate influence within these credit agencies downgrading the U.S.credit rating in exchange for getting secret payoffs from foreign countries hostile to the United States, or independent interests that would economically benefit from a U.S. downgrade?

    August 5, 2011 at 7:31 pm | Report abuse |
    • Nick

      EVERYTHING'S A CONSPIRACY! I HEARD IT ON FOX NEWS!

      August 5, 2011 at 7:36 pm | Report abuse |
  5. John Gary

    Wasn't the US rated AAA right into the Great Depression of the late 1920's??

    August 5, 2011 at 7:33 pm | Report abuse |
    • Cliff W.

      S&P has had us at AAA since 1917. I don't think we have ever been downgraded since S&P started rating.

      August 5, 2011 at 8:38 pm | Report abuse |
    • Jesus

      Tea Baggers won't make dramatic cuts in defense (we spend more on defense every year than the combined defense budgets of ALL the other countries on the planet), won't reform healthcare (the for profit healthcare debacle is bankrupting our nation...France Germany and Canada do NOT have a for profit healthcare system and have a AAA rating!), and tie major cuts to their Bible influenced social programs. Tea Baggers ARE THE PROBLEM!!!

      August 5, 2011 at 9:03 pm | Report abuse |
  6. leeintulsa

    Gobama. Good day for him.

    August 5, 2011 at 7:37 pm | Report abuse |
    • Lulu

      I do not get why everyone is blaming Obama for this. It was Congress that waited until the last minute to pass the debt, Congress who bickered until the last minute, and Congress who couldn't get their heads out of their @$$es to pass the bill. I say we TAKE THEIR PAY INSTEAD TO PAY FOR AMERICA'S DEBT!

      August 5, 2011 at 8:39 pm | Report abuse |
    • Buzzard Tony

      Like he has any control. They all suck, republicans happened to lead the way into this mess via the george Bush express.

      August 5, 2011 at 8:39 pm | Report abuse |
    • Mike Dallas

      The tea party had everything to do with this downgrade. They are the ones that stated they would never compromise or raise the debt ceiling which has to do with paying debt already on the books. Well, this down grade will up what YOUR children pay on the current and future debt service by 5 to 10 basis points.

      August 5, 2011 at 8:55 pm | Report abuse |
  7. N'ebriated

    It looks like S&P has become this super potency that can rule the world economy and putting countries on their knees. That is the problem when you let Capitalism take over. You created a monster and today is eating you alive..

    August 5, 2011 at 7:44 pm | Report abuse |
  8. John Donnelly

    Credit ratings on our dollar denominated debt when we print dollars is pretty irrelevant. How could we not ever be able to pay?

    August 5, 2011 at 7:47 pm | Report abuse |
    • shane

      ever heard of inflation?

      August 5, 2011 at 8:04 pm | Report abuse |
  9. Virginia

    People don't seem to understand if you buy a U.S. Savings bond, that is part of the country's debt because the government now owes you with interest. There's 4 trillion in Social Security debt that is part of the country's debt because in 1983 the government realized that it would not have enough when the Boomers retired so it collected SS at a higher rate and that is sitting there, part of the debt. It is not all money that is due to foreign countries, it is money that is due us citizens. Think of the U.S. as a bank-not all debt is bad...

    August 5, 2011 at 7:48 pm | Report abuse |
    • leeintulsa

      I think, too, we all read just the other day that china actually owns only 4 percent of our debt. Just more republican fear mongering. Saying our debt to china is going to destroy us is like saying aid to foreign countries is what is bankrupting us.. Was that republicans, too?

      August 5, 2011 at 7:55 pm | Report abuse |
  10. thomas mc

    You can thank the Tea Party terrorists, who held our country hostage, and destroyed its credit rating. We won't forget that in 2012!

    August 5, 2011 at 7:51 pm | Report abuse |
    • cnn is not middle of road

      blaming the tea party? S&P has told America for a month that the only plan that could stop a downgrade from happening was "Cut Cap and Balance" which the tea party supported, and Obama opposed and defeated. This marks the end of the Obama liberal experiment.

      August 5, 2011 at 8:38 pm | Report abuse |
    • Victor

      Held the country hostage? You dunderhead; when was the last time politicians ever kept every campaign promise they made? Because thus far, the freshmen Tea Party Republicans HAVE DONE JUST THAT.

      Excuse them for not being natural born liars like politicians of recent times. Tea Party in 2012!

      August 5, 2011 at 8:39 pm | Report abuse |
    • Independentmind

      Sure! Blame in on the tea party. I am not even fully conservative and find your comment plain wrong. This is because Liberals have ran this country in the group with their spending habits.

      August 5, 2011 at 8:41 pm | Report abuse |
    • Copo9

      The only experiment here is the tea party. And like all bad experiments, they usually go down the drain.

      August 5, 2011 at 8:44 pm | Report abuse |
    • Mike Dallas

      Not quite, S&P said it would take 4 trillion in cuts to avoid the downgrade, and President Obama offered up 3 trillion in cuts and 1 trillion in revenue, the House teatards rejected it, the down grade is owned by the GOP tea bagger "freshmen".

      August 5, 2011 at 8:58 pm | Report abuse |
  11. ROFLMAO

    Ha ha ha ha, obama actually bullied S&P around to keep the triple A rating. Doubt that would work with any smaller country....

    August 5, 2011 at 8:13 pm | Report abuse |
  12. Name*Angelee Brown

    I would hope that S&P would reconsider downgrading U.S.credit rating due to the fact that default was averted, and we had a positive jobs report for the month. I think we are going forward in a positive direction.

    August 5, 2011 at 8:19 pm | Report abuse |
  13. Nick

    Well that update sucks...

    August 5, 2011 at 8:32 pm | Report abuse |
  14. yada

    @ Nick That's exactly what I was thinking!

    August 5, 2011 at 8:33 pm | Report abuse |
  15. Bob

    Good job Tea Party. Thanks to the immense bickering over something that is usually routine, and thanks to the fact that we won't have increased revenue, we were downgraded.

    August 5, 2011 at 8:36 pm | Report abuse |
    • Victor

      I commend the Tea Party for fighting tooth and nail to keep every campaign promise they made. It's disgusting that they are being criticized for that. And you sheep wonder why politics is business as usual decade after decade? Well, no longer! The Tea Party, not Obama, brought REAL change to the US government.

      August 5, 2011 at 8:42 pm | Report abuse |
    • Tony

      Are you kidding Bob? The reason we were downgraded was that the spending cuts were not enough in the eyes of the people who rate our credit worthiness. It's not different than a person's credit score taking a dive when they take on more credit. The Tea Party wanted (rightfully so) for us to curb spending before borrowing more money.

      August 5, 2011 at 8:44 pm | Report abuse |
    • Dpoe9

      The Tea Party is a joke. The bad news is, the joke is on us.

      August 5, 2011 at 8:45 pm | Report abuse |
    • Independentmind

      Only way you will get increase revenue through increased taxes is to do what Americans expect and that is to reform the tax codes to be fair to all including the lower class who don't may any taxes. Everybody has a duty to pay taxes and the only way I support increasing the taxes on my six figure income is to cut the spending of this country and fix Socials Security and Medicare.

      August 5, 2011 at 8:45 pm | Report abuse |
    • spynnal

      disagree tony. It was the inability of congress to work together at all, hit the deadline, and show the world that the next ceiling debate, we may let it all fail, forced their hand at the downgrade

      August 5, 2011 at 8:48 pm | Report abuse |
    • Teapartywasright

      Hey bob, are you just in denial? The tea party warned of this precisely. Next time get your facts straight.

      August 5, 2011 at 9:00 pm | Report abuse |
    • Jim

      The MoveOn.org and SEIU operatives are at it again, huh? Flood places like this with outlandish name-calling trying to demonize the Tea Party movement. It's something to see just how viciously the machine lashes out to resist control being wrested from it by the PEOPLE of this country. Yeah– this time the vote wasn't "routine." Unlike when Senator Obama cast his "symbolic" vote against raising the debt limit in 2006. Oh, and it's time for some to give up this ridiculous ploy that anybody opposed to Obama's policies is motivated by race. Seriously– how long is that pathetic and desperate tactic going to be paid any attention?

      August 6, 2011 at 5:10 am | Report abuse |
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