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. FU

    @Robert: It's nice to hear opinions like yours, even if the subject is grim. This isn't about party affiliations, rich, poor, or middle class. We have a serious ethics and math shortage in Washington. They have allowed us to be sold to the lowest bidder, while not recouping any lost tax money from outsourcing. They have done this while going into war after war and increased social programs without adding restrictions to the social programs. They give free health care for people that don't work and tell the underemployed to take a hike when they need a little help in their journey to be a better and more productive citizen. We are all caught in the middle and everyone is getting tired of it. Clinton left with a surplus, but he also signed some trade agreements that were not favorable with the US. A bill was shot down in congress that would have prevented any American company from doing business with any foreign company that engaged in child slavery, or forced labor. Our leaders are sick and the cancer needs to be removed. How dare they tell us what is moral when they can't even be moral themselves.

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

      The only answer is to END the two party monopoly (duopoly?) and vote in a viable third party. The only way to attain real change, is to CHANGE the system itself. Vote all out these corrupt, blue blood, ingrained politicians and start from scratch.

      August 5, 2011 at 9:48 pm | Report abuse |
  2. mholly99

    Bi partisan bickering and reckless spending by the govt as well as the American people has gotten out of control...here's the proof

    August 5, 2011 at 9:38 pm | Report abuse |
  3. sherriw

    We are America! We shall overcome! Thanks crappy teaparty/selfish republicans. All in congress should have compromised for the better of the country. Thanks-Yea right!

    August 5, 2011 at 9:40 pm | Report abuse |
    • David

      The tea party wanted deeper cuts. You're not still drinking the OBAMA koolaid, are you?

      August 5, 2011 at 9:49 pm | Report abuse |
  4. db

    To all you Obama supporters out there, tell me how do you spend more than you take in and not go broke?

    August 5, 2011 at 9:40 pm | Report abuse |
  5. JFritz

    I predict that "drinking the koolaid" will be replaced by "drinking the tea." Gosh, did we get hosed by this bunch of selfish, greedy reactionaries. They are like stubborn, oppositional-defiant toddlers, and being bad parents, the rest of Congress gave in to them.

    August 5, 2011 at 9:40 pm | Report abuse |
  6. Tea party crazy

    I love the tea party, now we kiss goodbye the american way of life.

    August 5, 2011 at 9:41 pm | Report abuse |
  7. Larfy

    LOL at the people blaming this on Obama. On one hand the repubs say that government should stay out of the economy and then they complain when the government doesn't save the economy. Nobody, Repub or Dem, could save this turkey.

    August 5, 2011 at 9:45 pm | Report abuse |
  8. JFritz

    db, the money was long ago spent. We haven't got enough REVENUE to pay off the debt. You can't cut enough to do it, although some cuts are necessary. Unless you are a gazillionaire with those tax cuts, YOU are not going to win letting them have low tax rates. You will not be trickled down to, and you will not get a piece of the pie. They get their money cutting jobs, not making them. It's the rare oligarchist who does the right thing without being made to.

    August 5, 2011 at 9:45 pm | Report abuse |
  9. b.d.

    Wow. Everyone seems to be blaming everyone else. The politicians are only mirroring the public. I've just read several hundred comments on this story alone and the one thing that strikes me hardest is the completely simplistic and immature tone of the comments. I mean, you all realise that no one man or party has anywhere near the power to affect the market like you all seem to be claiming? All politicians in living memory used our own money to buy votes, both of the wealthy and the poor. We all want to live like kings while blaming others for our problems. We need to step back, simplify ang ditch the rapacious greed and self serving politics that are killing our country. In times of peril citizens are expected to step up and sacrifice. Even our lives are on the table in such times. Yet the wealthy have a hissy fit over such issues such as paying more tax on their private jets? Cant the wealthiest country in the history of the world take care of it's citizens instead dumping trillions into unneccessary wars and weapons systems that bring no return? In the future when people have realigned thier priorities I'm sure that they will stand agape at the waste, fraud and and unbounded greed of the last few generations. As a nation we should be ashamed of ourselves. It didn't have to be this way. We'll destroy everything worthwhile for monetary gain.

    August 5, 2011 at 9:45 pm | Report abuse |
    • Please STOP FIGHTING

      I believe in America. We've been through worse and survived, in fact, we've come out stronger. We are a great nation, a melting pot, full of freedom and liberty in every way, shape, and form.
      But I'm disgusted with both the Republicans (Tea Partiers included) and the Democrats. The comments section of this article show how fractured our nation has become. Both MSNBC and FOX's skewed portrayals of Democrats and Republicans have made enemies of our neighbors. What we need to do now is to stop bickering and work together! Please, for the love of all that's holy, please try not to see someone who differs in opinion with you as a "fat cat Republican" or a "pot smoking Liberal." Try and see them as someone you respect and know you need to work with to make America even greater.

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

    'No risk' the US will lose its top credit rating, says Treasury's Geithner.

    Smooth... Turbo Tax Timmy.

    August 5, 2011 at 9:46 pm | Report abuse |
  11. David

    Obama must resign NOW!!

    August 5, 2011 at 9:47 pm | Report abuse |
    • JFritz

      Oh, David. Obama resign now? That's all the country needs, instability. Just whom do you want to take over?

      August 5, 2011 at 9:56 pm | Report abuse |
  12. DAVID

    when will Republicans be responsible for their debts, interests accrued and passed on to the next administration???

    August 5, 2011 at 9:48 pm | Report abuse |
  13. JFritz

    Sure hope you're right about the future, but I don't have your optimism. I've never seen a greedier, more self-indulgent generation than the one coming into adulthood. Alas, Madison Avenue triumphed. Trump is the logical president for this bunch.

    August 5, 2011 at 9:49 pm | Report abuse |
  14. DAVID

    why didnt bush hand Obama surpluses like clinton gave him??? hmmm i guess the southerners finally got away with the loot!!!

    August 5, 2011 at 9:50 pm | Report abuse |
  15. DAVID

    KICK ALL OF THEM OUT IN NOV 2012!!!

    August 5, 2011 at 9:52 pm | Report abuse |
    • JFritz

      You realize, of course, that probably means the looniers will come in. Stay calm and write your congresspeople.

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

      @JFritz: I actually have written my congress members many times. I also went on americaspeaksout.com (John Boehner's site) and there were thousands of posts about ending outsourcing (this was 3-4 years ago). The repubs or Dems have not addressed the issue and they will not ever allow a 3rd party primary. Some loons may flock to that primary, but I believe many independents (40% voting block which is bigger than either 30% block) would vote in that primary for centrists. Even some mad tea party candidates are not desirable to the far right. Don't believe the 2 party hype. They just don't want any compet ition. I'm also getting tired of spacing out benign words because there is a few letters in it that spell dirty words, however I can spell s_h_I t like this just fine.

      August 5, 2011 at 10:21 pm | Report abuse |
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