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. greg

    S&P are the same guys who believed all was well before the bubble bust.

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

    It's Obama's fault, no it's the tea party's fault, no it's Obama's fault, no it's the tea party's fault.....It's all of our faults – we chose to fund two wars off the books, give huge tax breaks to everyone, run our pension funds with mortgage backed securities – essentially, we all thought we could get by on the cheap or other peoples efforts – and now we will all have to pay the piper. Grover Norquist needs to go back to his hole, and those who follow him need to take back their pledge, and all the recipients of aid (schools, medicare, social security) are going to have to take a cut – and we are going to need to raise taxes no matter what – this will increase our debt service costs.

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

      simply and well put......

      August 5, 2011 at 8:46 pm | Report abuse |
    • Walt

      Grover thinks any tax is too much. Does that really make sense ?

      Better to decide what the Gov should do – what programs there should be. Then figure out how to pay for them.

      But if we don't want to pay for them, then that's fine too – just end those programs.

      The issue I have with the Tea Party is they talk about lowering taxes but they don't talk about what to eliminate in terms of spending.

      August 5, 2011 at 8:50 pm | Report abuse |
  3. VoteForMichelleBachmann

    Does that mean Govt has to pay more in interests? And to pay this interest, they need to borrow more money? Thereby creating another political showdown in DC, thereby causing another rating downgrade etc. etc.

    Bachmann must be a happy person today ...

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

      she and her $4500 haircut are always happy – pays to be dumb

      August 5, 2011 at 8:44 pm | Report abuse |
  4. Harshtimes

    Even after the recent compromise the U.S. is still borrowing 40 cents for every dollar it spends. There is no way that the government should expect to keep it's triple A rating with our economic crisis. The has to be a drastic cut in expenditures. But everyone has a not in my backyard mentality. Look what happened in the recent FAA funding. The Republicans wanted to cut subsidies to small, mostly unused airports. The Democratic controlled Senate didn't want to cut one penny of this wasteful spending. We don't have a tax problem, we have a spending problem and we are out of other peoples money.

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

      Tell the rest of the story – it was not about a few airports.

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

    Thank the Tea Party Hillbillies!

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

      Tea Party has nothing to do with this. Your clueless

      August 5, 2011 at 8:46 pm | Report abuse |
  6. RTC

    Didn't S&P tell the government the debt ceiling deal needed about $4 Trillion in cuts to avoid a downgrade? The deal was not big enough in cuts.

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

      And not enough new revenue (tax increases).

      But don't worry...the Temp tax cuts expire after next year. Then we'll see a revenue increase.

      August 5, 2011 at 8:47 pm | Report abuse |
    • Bob

      Exactly what Obama tried to do, but Boehner, Cantor and their Tea Party puppeteers would have none of it. This one is properly laid right at the Tea Party's doorstep.

      August 5, 2011 at 8:47 pm | Report abuse |
  7. G.G.

    Since these companies have not been appointed in any official capacity whatsoever, these evaluations of the governments credit ratings are effectively pointless. They're only self serving to the companies that feel they have authority to dictate the market to protect themselves.

    August 5, 2011 at 8:44 pm | Report abuse |
    • Keithsix

      Thank you....well said.

      August 5, 2011 at 8:46 pm | Report abuse |
  8. Thomas

    The next time you get a loan remember to thank your local Tea Party representative for your higher interest payments and then vote them out of office!

    August 5, 2011 at 8:44 pm | Report abuse |
    • Chris

      How do you figure? These agencies all said major changes and cuts need to take place and the democrats have ignored that. This is what the tea party has been trying to stop and you have the uneducated gall to blame the tea party??? Wow we're in big trouble if a lot of people think like you

      August 5, 2011 at 8:52 pm | Report abuse |
    • Sanity

      Maybe you should become informed. We got our rating cut because we spend too much money, not too little.

      August 5, 2011 at 8:53 pm | Report abuse |
  9. D

    Buy low, sell high!

    August 5, 2011 at 8:44 pm | Report abuse |
  10. dv

    Where is Grover Norquist and all the T party idiots- vacationing in Colorado and Alaska leaving behind the American people in dire straits, American people should never forget the service of Tparty assh......... and throw them out

    August 5, 2011 at 8:44 pm | Report abuse |
  11. kay

    I guess the Dems and Obama should have cuts more expenses like the Republicans wanted, and the S&P suggested. Bush wasn't there last week during these debates, so who are they going to blame now?

    August 5, 2011 at 8:44 pm | Report abuse |
    • Walt

      Um, Republicans wanted to cut LESS.

      Less cuts but a balanced budget amendment. An amendment that probably could not have gotten enough votes to pass in either house of Congress.

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

    It is Obama's fault

    August 5, 2011 at 8:44 pm | Report abuse |
  13. steveNYC

    The idiots in congress needed to do something much more substantial to curb deficit spending. The TEA PARTY forced us to lower teh spending – BUT NOT NEARLY ENOUGH!!!

    August 5, 2011 at 8:44 pm | Report abuse |
  14. mark nelson

    America is fat and lazy and we have squandered our precious resources. We don't deserve a AAA rating.

    August 5, 2011 at 8:44 pm | Report abuse |
  15. Jonathan

    Nice to know somebody is actually doing the math...and this is actually the perfect time of week to do it. Just after the markets close for the weekend: it gives time for the shock to settle in before markets open Monday.

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