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. Liam

    The tea party, and by extension the Republicans, are to blame.

    August 5, 2011 at 8:44 pm | Report abuse |
    • Hannibal7

      Not cutting the spending is why we got the down grade. S & P knows we don't have the income to match the spending. Try again.

      August 5, 2011 at 8:49 pm | Report abuse |
  2. realist111

    This is ridiculous. Someone needs to investigate the S&P. Something is amiss. Didn't they screw up asset backed securities. The bush and Obama administration have let them off and now they are doing this.

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

    This is totally the tea parties fault (and anyone who voted them in). the tea party has an unjust and misleading influence. Nearly all economists agree that any deficit solution will require increased revenue since it can’t just be done with spending cuts.

    Read this: http://economistsview.typepad.com/economistsview/2011/05/are-taxes-in-the-us-high-or-low.html and this is good too: http://factcheck.org/2011/07/debt-limit-debate-round-up/

    Somehow, the tea party has gotten tax increases completely removed from the table despite what the experts agree that it is required. This is the reason why our credit rating was downgraded. Out of utter fear from the tea party’s loud but ignorant influence and fearing a challenge from tea party support during the next election, no one wanted to even approach the subject of raising taxes. I’m very disappointed in Washington in its lack of courage against this loud minority group, in the tea party and republicans for making “compromise” a bad word, and for the President for not standing up to their bullying. I like Obama, but he’s an idealist and as one, I’m not sure he stood his ground against the bluff of those playing the political game. Screw the tea party!

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

      This is the result of making no attempt to reign in the deficit and continuing to spend like drunken sailors. The Chinese downgraded us earlier in the week because they 'question our ability to repay it'.

      August 5, 2011 at 8:53 pm | Report abuse |
    • Sanity

      You are blaming the only people who tried to prevent this mess by reducing spending. You have no concept of the issues.

      August 5, 2011 at 8:55 pm | Report abuse |
  4. matka1

    Now that we have been downgraded from AAA to AA+ I hope all you smart folks that voted the anointed one to office are finally happy with your vote.... The worst freaking (president) this great country has ever seen...

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

      Ummm, the worst president was Bush, who all the Republicans thought was lead to the White House by Jesus. Republicans are a total disgrace, putting their extremist teabagging minority ahead of the interests of this country. You should be ashamed of yourselves.

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


      August 5, 2011 at 8:48 pm | Report abuse |
    • Tony1957

      The Tea Party campaigned on not raising the debt ceiling, the pushed in Congress not to raise the debt ceiling and they almost succeeded. Now that you see the outcome of their action it's Pres Obama fault.

      This is the fault of the Tea Party and everybody who voted for those lunatics.

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

    people, you asked for "change" and thats what you got. I didn't vote for obama, but I have to pay for your stupid vote.

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

    Everyone elect democrats next time. Both parties suck, everyone knows it, but this whole debt debate and now this announcement proves that dems are clearly the lesser of two evils.

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

    Guess that last debt increase broke the camels back. Thanks a lot Democrats. Learn not to spend!

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

      Perhaps if the morons in the teabagging GOP hadn't played politics with the debt ceiling debates we would have not only gotten $ 4 trillion in cuts (vs. the $ 2.4t we ended up with), and we'd probably not have received the insult of this downgrade.

      August 5, 2011 at 8:48 pm | Report abuse |
  8. Tracy Carpenter

    Yes, it does. Wonder what the markets will do in the morning . . .

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

    Another "crisis" for Obama to exploit – – – here comes another phony stimulus!

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

    World to America: Get your house in order!... America: DERP.

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

    Looking at the country's finances, I'm surprised the rating wasn't cut further. Obama must have paid them off.

    August 5, 2011 at 8:45 pm | Report abuse |
  12. Bruce in VA

    This downgrading is a bummer, but not entirely unexpected. What I'd like to know is what is the rating of other nations. If the USA is still highest (and it probably ought to be) then OK.

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

    Another first for this Country under Obama's leadership!

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

      Last I checked the economy was the territory of congress and that is ran by the GoP, So good job Tea Party and GOP!

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

      Obama can only do so much. This is a result of the asinine Bush/House policies.

      August 5, 2011 at 8:48 pm | Report abuse |
  14. mark

    Last I checked the economy was the territory of congress and that is ran by the GoP, So good job Tea Party and GOP!

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

      No, Congress is not run by the GOP. The GOP has had the House for a few months. Dems had all of Congress since 2007; that's when the spending went wild–not while the GOP had Congress. Look it up.

      August 5, 2011 at 8:57 pm | Report abuse |
  15. Hannibal7

    And then it was gone. Ka-Poof...
    Hey Libbies, how's that change working for you?

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