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.

soundoff (678 Responses)
  1. Rita

    I'm "still" happy with my vote but still peeved about the mess he inherited.

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

    republicans so focused on bringing down Obama they're bringing down OUR COUNTRY

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

      I sure hope the Republicans are happy about getting downgraded by S&P because they are determined to bring Pres. Obama.

      August 5, 2011 at 9:03 pm | Report abuse |
  3. Julianne Feldmar

    This is what you get when you negotiate with terrorists.

    August 5, 2011 at 8:58 pm | Report abuse |
  4. julio

    He who blames OBama must remember that JB got 98 percent of what he wanted in this deal.....

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

    Should these guys at rating agencies wanted to keep their remaining (if any) credibility they had to move..Still their credibility is in ruins and their future questioned. As for the US: it is not enough anymore to have the privilege to print the greenback like hell inflating debt, simply not enough to keep the AAA.

    August 5, 2011 at 8:58 pm | Report abuse |
  6. Rick in CT

    Hey Clyde, dig a little deeper than the headline and small amount of info here. It's not because of Obama, S&P's decision is based on the Republicans and Tea Baggers refusing to generate any new revenue – or even closing loopholes – and their stonewalling negotiations to the point of near default. This isn't a political assessment, it's a factual practical view of how those obstructionists will bring down the country to protect every penny of the ultra rich !!!!

    August 5, 2011 at 8:58 pm | Report abuse |
  7. Joe

    Mr. President, now do you believe that you can't spend your way out of a recession? Or do you plan to steam on ahead for the new debt ceiling with another wasted stimulus package?

    August 5, 2011 at 8:58 pm | Report abuse |
    • julio

      We need jobs it's that simple

      August 5, 2011 at 9:08 pm | Report abuse |
  8. DAVID

    Obama wanted 4 trillion in cuts to prevent this...what happen to compromise???

    August 5, 2011 at 8:58 pm | Report abuse |
    • AA+

      Wanted $4 Trillion in cuts? Then why did he add $5 trillion in spending in the first place?

      August 5, 2011 at 9:00 pm | Report abuse |
  9. Thanks Democrats

    Great job as leaders getting us downgraded first time in almost 100 years. No one believes you can manage anything.

    August 5, 2011 at 8:59 pm | Report abuse |
  10. can you spare a dime, man


    (Hopefully quarters and dimes!)

    August 5, 2011 at 8:59 pm | Report abuse |
  11. outsider

    Interesting to see how the loony right put a gun to the head of the dems, moderate republicans and Obama (the took you hostage with the debt ceiling fiasco) and show the world how dysfunctional the US gov can become and now they try to pin the blame on Obama.

    As someone watching this from the outside, you have to realize how stupid you look to the rest of the world. America used to be the top of the top. People aspired to become like you or to be part of you. Now you are the symbol of failed democracy because a small but determined and vocal minority forgot how to be civil and respect the wishes and needs of their neighbours. I fear that you have begun down a dark road that will not lead anywhere good.

    Balanced budget stuff aside, America has become a place where civil discussion has become open warfare. Compromise has become a bad word and a sign of weakness. Intelligence is being defeated by the mob mentality.

    Good luck to you in your difficult path ahead.

    August 5, 2011 at 8:59 pm | Report abuse |
    • AA+

      The US may be heading for bankruptcy, but we're still light years ahead of most countries and slightly better off than other civilized countries.

      August 5, 2011 at 9:01 pm | Report abuse |
    • watcher

      Why is that dems are the only ones with rhetoric like "putting guns to peoples heads" and then in the same breath scream the tea party is violent? Seems to me that dems are the ones who need to be watched.

      August 5, 2011 at 9:03 pm | Report abuse |
    • outsider

      AA+, yes, you are ahead of many countries, but you are heading into the sunset, not into better days. There are many countries in the world doing better than the US. Many countries have a better balance of social programs (thats not a bad word in parts of the world) and capitalism that give smart people from all backgrounds the chance to reach their potential and that benefits everyone. America was once like that but I fear those days are numbered unless you reach out to each other with open hands again instead of clenched fists.

      August 5, 2011 at 9:06 pm | Report abuse |
    • outsider

      Watcher, don't worry, I am not a Dem. I am not an American (I have many depressed American friends these days). Dems are a little to right wing for me.

      The gun to the head was an analogy of one being coerced to do something you don't want to do. The gun was to one's own head, NOT implying violence to another person. Poor analogy in retrospect. Maybe just having one's arm twisted behind your back by un unsavoury character. That better for you?

      August 5, 2011 at 9:09 pm | Report abuse |
  12. DAVID

    get congress out of recess asap to fix this mess!!!

    August 5, 2011 at 8:59 pm | Report abuse |
  13. Bisjac

    You can all be as angry as you want. but when the polls open, every one of you can only see the republican or the democrat. shoot yourselves in the foot some more.
    the parties are broken, and its more of the same every election time.

    August 5, 2011 at 8:59 pm | Report abuse |
  14. Diane

    This is the same rating agency that gave triple-A ratings to the crappy mortgage backed securities! How much credibility can they have? S&P should be downgraded!

    August 5, 2011 at 8:59 pm | Report abuse |
  15. BeenThere222

    So, the leaders who were fighting over the steering wheel in the car headed over a cliff with the American family hostage in the back seat are upset SRS is calling them out for their misbehavior. I mean, hey, they swerved just in time, no harm done, right? Just a little family argument. Its not like were irresponsible and actually hurt anybody!

    August 5, 2011 at 8:59 pm | Report abuse |
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