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. watcher

    Oh it's another he was against it before he was for it deals - we've heard of that before?

    Obama is done. No credibility.

    "The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies."

    Obama 2006 under Bush presidency

    August 5, 2011 at 9:22 pm | Report abuse |
  2. Pedro

    Hi Guys,

    Come to Canada, our economy is strong and our unemployment rate is 7.2. Your neighbours to the north will welcome you.

    August 5, 2011 at 9:23 pm | Report abuse |
  3. Please

    I'm sick of hearing people blaming the Bush administration for our current misfortune under Obama. When will Obama be responsible for anything?! It's been THREE YEARS since Bush left office and there is still NO ECONOMIC PROGRESS. I don't want to hear blame the Republicans, blame the Democrats, blame this, blame that. We, the American people, DESERVE & NEED a leader that will pull us up from the dirt no matter what party he's in. WAKE UP PEOPLE AND VOTE WITH YOUR MINDS NEXT ELECTION. THIS IS NOT AMERICAN IDOL; THIS IS OUR FUTURE.

    August 5, 2011 at 9:23 pm | Report abuse |
    • 12-21-12

      Bush left office on January 19th, 2009...

      it'll be 3 years on January 19th, 2012...

      your post is probably full of additional errors!!!

      August 5, 2011 at 9:33 pm | Report abuse |
    • israel

      while it's easy to blame bush, it's also correct to blame bush....he took our balanced budget and our surplus and turned it into a defecit and a completely unbalanced budget over his 8 years, with another $5T of HIS bills that we have yet to pay off.....bush never made an attempt to correct any of his wrongs, at least obama did.....whether or not he failed doesn't matter, he tried, don't forget that both bush AND obama pressed through stimulus packages worth about $800B a piece and BOTH of those packages did NOTHING for us.....blaming obama soley is wrong just like blaming bush soley is wrong, bush was wrong initially and obama just continued that mistake, however.....had there been no bush, we might not've been in this situation

      August 5, 2011 at 9:34 pm | Report abuse |
    • N

      Bush is responsible for weak economic policies that facilitated the financial crisis. Obama is responsible for weak economic policies that are unable to get us our of the recession. I blame both of them but while Bush is history, Obama is unfortunately our present. Both are weak presidents with failed economic policies and without vision about the future of this country. One day the historians will bundle them in one and the same dark period in the history of our great country.

      August 5, 2011 at 9:47 pm | Report abuse |
  4. watcher

    Obama is a failed leader. He said it himself.

    "The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills."

    BYE BYE

    August 5, 2011 at 9:26 pm | Report abuse |
    • FU

      @watcher: I love when leaders admit failure then run for re-election. Obama probably meant it was a failure of God's leadership, so he will erect more shrines to men and then come out with a book t itled "The Audacity Of Ego".

      August 5, 2011 at 10:11 pm | Report abuse |
  5. Gary

    So disgusted at these republicans.
    If inly they had removed the tax breaks!
    SMFH

    August 5, 2011 at 9:27 pm | Report abuse |
  6. DAVID

    deficits dont matter hehe.

    August 5, 2011 at 9:27 pm | Report abuse |
  7. Robert

    This is not Obama's fault and it is not Bush's fault. This problem has been building for fifty years. Democrats get new programs, Republicans get tax cuts, then we all stand around picking our noses wondering why we have a deficit. We need to exit all our wars, get out of NATO, close all foreign bases, cut social programs back to what they were intended to be, eliminate subsidies to private businesses, eliminate a few thousand pages of regulations and the regulating agencies that go with them and raise taxes. A lot. Then we may have a start to getting a handle on this and have a government in which somebody may have confidence some day. Nothing else will work.

    August 5, 2011 at 9:27 pm | Report abuse |
  8. DAVID

    the country was not in a recession when obama voted no to more george bush spending...it was smart because we would be in this mess if not for george bush in the first place!!!

    August 5, 2011 at 9:28 pm | Report abuse |
    • db

      What happened in the last three years Obama has been in Office? Hows all that Hope and Change doing for you now? Are you better off then you were only 4 years ago? Is our dollar worth more today, are gas prices down, is food coming down in price, is gold and silver coming down in price showing that the dollar is stronger? Are stupid people still supporting Obama and blaming Bush for everything from hang nails to global melting? Give me a break and go back to mommy.

      August 5, 2011 at 9:39 pm | Report abuse |
  9. bawana

    they removed my 1st post because i called the teabagger wahtthey are pieces of d@#g

    August 5, 2011 at 9:31 pm | Report abuse |
  10. Jim Robertson

    It is difficult for most of us to understand how large the United States $14.343 trillion debt is and put into relatable terms. Here’s an article that puts the number into terms that are more understandable for those of us who are used to balancing our chequebooks:

    http://viableopposition.blogspot.com/2011/07/americas-sovereign-debt-issue-putting.html

    August 5, 2011 at 9:32 pm | Report abuse |
  11. DAVID

    deficits dont matter....hehe dick cheney evil laugh...

    August 5, 2011 at 9:35 pm | Report abuse |
  12. DAVID

    FIRE THIS CONGRESS ASAP!!!

    August 5, 2011 at 9:36 pm | Report abuse |
  13. israel

    well, this one rests on the shoulders of house republicans and democrats and their partisan bickering that got us into this situation, maybe if they had set aside rhetoric for a week and decided to actually work together and create a seriously reasonable deal our credit rating would continue to be AAA....even if the deal they created didn't do enough it would've shown that washington can get it's act together when it needs to, and that doesn't mean hacking up a half ass deal in the final hour

    August 5, 2011 at 9:37 pm | Report abuse |
  14. David

    SO beyond disgusted with the GOP for allowing the irrational tea party radicals to rule their behavior. And almost as disgusted with Obama for giving in. But make no mistake, this is the fault of the tea party republicans and we will be paying FAR more in the long run for this than if they had just allowed the "temporary" tax cuts on the wealthy to expire and closed tax loopholes that are allowing large corporation to pay virtually no tax.

    August 5, 2011 at 9:37 pm | Report abuse |
  15. JFritz

    Obama haters, you just don't get economics. DEBT is money borrowed and spent–like 2 long wars with no revenue forthcoming. In fact, during the Bush years we spent and spent and spent and CUT taxes (revenue, for the economicallly illiterate). There is no way to dig out of the hole without raising revenue. Cutting spending, especially since the Repubs don't want to cut spending for their precious military-industrial complex, won't do it alone. You've got to have REVENUE. Taxes are revenue, and cutting taxes and giving excessive loopholes to the very wealthy deny the US of needed revenue. Want more, TAX CHURCHES. They are corporations.

    August 5, 2011 at 9:37 pm | Report abuse |
    • watcher

      Wow we must have alot of wealthy people here in the US since 47% of people don't pay any taxes at all - and we know the rich pay no taxes. But going after that 0.1% of the weathly scam sure keeps the class warfare going doesn't it?

      August 5, 2011 at 9:55 pm | Report abuse |
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