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. S. Surrell

    Joe is so right, I could not say it any better. Go "joe"

    August 5, 2011 at 8:42 pm | Report abuse |
  2. Adam

    Thank you GOP.

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

      you're quite welcome, ostrich-head-in-the-sand, hypocritical lying Democrats

      August 5, 2011 at 8:44 pm | Report abuse |
  3. Westgrl

    I hope Congress is proud of themselves. Between Republicans & Democrats fighting like children in the sandbox & the tea party with their "no compromise" stance, this country is now in a slow slide into the toilet. Great job by all!

    August 5, 2011 at 8:42 pm | Report abuse |
  4. steveNYC

    Welcome to the age of Obama! Blame, Demonization, Scare-tactics, and total lak of leadership and competency helped lead to this.

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

      Oh please! I am not happy with Obama right now but you can't blame one person on this. Every politician in DC had a part to play, no matter what party they are in.

      August 5, 2011 at 8:44 pm | Report abuse |
  5. S&P is a joke

    Who cares what they say FITCH and MOODYS reaffirmed our AAA. S&P just became a nonfactor. BTW you teaparty fake "patriots" (basically people calling themselve patriots that never served in the military) can screw!

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

      How do you know they never served in the military? Sources?

      August 5, 2011 at 8:50 pm | Report abuse |
  6. TBE

    Now do you see why the president continued to warn us about making the debt ceiling a political issue. Now we are all going to suffer because of the people that were elected to congress. If you voted for the current congress. Please remember what they have done the next time you cast your vote.

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

      The downgrades are coming because of the accelerating debt being piled up by Barack Hussien Obama, not any issue with the debt ceiling.

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

      So you mean to tell me that in two years the president has caused this? Seriously? You will believe any talking point. I don't agree with either political party. They both put us in this mess. But for anyone to think you can make 14 trillion dollars of debt in 2 years is very ill informed. Lets do the math shall we. Stimulus was 780 billion, most of it was taxes cuts. Auto bail out which was 130 billion. The passing of the health care act, has not cost anything yet, because it doesn't effect anyone until 2014. This comes up to 910 billion, so where is the rest of the 13.1 trillion dollars comes from. Let's see The bush tax cuts which cost the government 100 billion a year since 2001. Which adds up to 1 trillion in the last 10 years. Medicare part D has cost us 249.3 billion since 2006. The bank bailout was 700 billion, which included fannie and freddie. Afghan and Iraq wars cost 1 trillion a year since 2003 that is about 8 trillion dollars. This means that while bush was president. He spent 9.949 trillion dollars. Medicare, Medicad, and Social Security takes up the remaining 3.151 trillion dollars remaining in our debt. All of these facts are online. GOOGLE it. It is there for you to see. So explain to me again how did the president put us in this situation? This is why there are elected official that has stood in front of camera and said that the debt ceiling means nothing (the tea party elect). Please stop repeating talking points, unless you have facts to back you up. Unless you can do that you are being dishonest.

      August 5, 2011 at 9:34 pm | Report abuse |
  7. Ralph

    The debt ceiling was raised 7 times under Bush, 18 times under Reagan. The political spectacle of the Republicans will cost the nation dearly. But it's no surprise to Californians. Republicans who signed the anti-tax pledge refused to balance the budget with revenue and caused California to lose its top bond rating.

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

      You're blaming the GOP for CA? Now that's really funny!

      August 5, 2011 at 8:51 pm | Report abuse |
  8. Subaru

    Wow.... not surprising, but nobody would imagine the day it would happen.

    August 5, 2011 at 8:43 pm | Report abuse |
  9. Paulie

    If anyone held our country and economy hostage it was Harry Reid and democrats and because they got their way instead of republicans righting the sinking ship immediately we have what we have today in the stock market and this downgrade.

    August 5, 2011 at 8:43 pm | Report abuse |
    • obamayakyak

      yeap

      August 5, 2011 at 8:47 pm | Report abuse |
  10. jacobs

    after massive borrowing during the bush years and half of the debt incurred under Obama has gone to paying the interest on george bushes loans...thank you gop for destroying America!

    August 5, 2011 at 8:43 pm | Report abuse |
  11. please

    Aren't these the same rating companies that gave high rating to mortgage backed securities that got us into the financial mess in the first place?

    August 5, 2011 at 8:43 pm | Report abuse |
  12. rob

    Kiss the markets good-bye on Monday....

    August 5, 2011 at 8:43 pm | Report abuse |
  13. obamayakyak

    Just one more nail driven into the American coffin by Barack Hussien Obama.

    August 5, 2011 at 8:43 pm | Report abuse |
  14. John Hebert

    Way to go obama. You have no clue how to solve the problem and your advisors who do are skipping town because you will not let them consult you. You have some serious mental issues about your ego. Give it up and go on vacation and let the gown ups run the country.

    August 5, 2011 at 8:43 pm | Report abuse |
  15. BK in DC

    Thanks Obama for blowing 4 trillion in less than 4 yrs.

    August 5, 2011 at 8:43 pm | Report abuse |
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