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. Brett

    You can continue to blame Republicans because, well, it's what you are trained to do as Democrats. However the fact remains that neither the Democratic proposal nor the Republican proposal had enough cuts in it for the US to keep it's AAA credit rating with all of the credit agencies. Some of them fell in line with the pressure from the White House (Moody's) but S&P obviously wasn't falling for it. I'm curious about what "fundamental error" S&P made in it's math, I highly doubt that S&P "forgot to carry the one" on one of the most historic debt downgrades in history. Sounds to me like the White House is trying to strong arm them for political purposes.

    August 5, 2011 at 8:55 pm | Report abuse |
    • Epi

      Great points.

      August 5, 2011 at 8:57 pm | Report abuse |
    • Thomas Reynolds

      No.

      August 5, 2011 at 9:02 pm | Report abuse |
  2. DAVID

    who needs alqaida and the taliban when we have republicans and the tea party???

    August 5, 2011 at 8:55 pm | Report abuse |
  3. Brent

    Whatever happened to the times if someone messed up we would just run them out and bring in someone else that would do what the people wanted! Politics is a joke! When are we going to wake up from this mess!

    August 5, 2011 at 8:55 pm | Report abuse |
  4. Mark

    And you thought the markets tanked on Thursday? Wait for next week

    August 5, 2011 at 8:55 pm | Report abuse |
  5. Epi

    CNN viewers must be the dumbest people on the planet. All the comments blaming people who wanted us to be responsible with money instead of spending us into oblivion and bankruptcy like the libs want to do. S&P downgraded us because of irresponsible spending, not because a group wanted to curtail out of control spending. Simple economics.

    August 5, 2011 at 8:56 pm | Report abuse |
  6. DAVID

    if boehner had gone along with Obamas 4 trillion in cuts we wouldnt have this mess thanks gop!!!

    August 5, 2011 at 8:56 pm | Report abuse |
  7. Moggy

    Tea Baggers = Terrorists = Treason. That's all anybody needs to know about this mess.

    August 5, 2011 at 8:56 pm | Report abuse |
  8. Jrh2010

    Sad day to be an American. Time to really stand up and call for some real accountability before China starts foreclosing on the White House.

    August 5, 2011 at 8:56 pm | Report abuse |
  9. Klaark

    If you read the article, you'll see the headline is yellow journalism trash. CNN is trash.

    August 5, 2011 at 8:56 pm | Report abuse |
  10. Tom Costello

    Cassius’s advice to Brutus in Act 1, Scene 2 of William Shakespeare’s ‘Julius Caesar’: “The fault, dear Brutus, is not in our stars, but in ourselves.”

    August 5, 2011 at 8:56 pm | Report abuse |
  11. Garrido

    This may be a good thing even though it's unnecessary, perhaps now we can cut foreign aid to those countries that backstab us all the time. Perhaps the credit card companies won't try to target vulnerables anymore because of less return and less borrowing power.

    August 5, 2011 at 8:56 pm | Report abuse |
  12. noteaparty4me

    I have to give it to hate groups like the GOP and Tea Party. When you hate a black man as commander-in-chief, you really hate. Before you see him successful you would destroy this country. Let's reminisce.."This will be his waterloo", "It will break him", ,"Tar baby", "Your boy", "you lie" and good ole American as apple pie...N-word. But your finest hour was yet to come...now you have destroyed this country's credit rating becaue of your hate for President Obama. That is a newly defined hate for Americans..GOP, TEA PARTY style hate. John Boehner said it best, "iI got 98% of everything I wanted" You got it Johnny. GET THIS...America is downgraded.

    August 5, 2011 at 8:56 pm | Report abuse |
    • Epi

      You are clueless. Nobody hates Obama because he is black. They hate him because he is a terrible president who wants this country to become a European socialist country.

      August 5, 2011 at 8:58 pm | Report abuse |
  13. Goofabetta

    Investigate the rating agencies who Tripled-A'd us into the crisis in 2008.

    Sell some assets, like unused BLM and Forest Service land out west, and military assets like mothballed battleships and aircraft carriers.

    August 5, 2011 at 8:56 pm | Report abuse |
  14. DAVID

    tea party = treasonous remains of the british invasion they are the descendent of all those who took the side of the british!!!

    August 5, 2011 at 8:57 pm | Report abuse |
  15. T-Bone

    It is both parties fault.

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