California economists say S&P downgrade is no big deal
August 10th, 2011
05:48 PM ET

California economists say S&P downgrade is no big deal

Standard & Poor's recent downgrade of the U.S. credit rating AAA to AA+ has caused some concern and even panic.

But some economists in California - a state rated A- by S&P - say it's no big deal.

"A half-point drop on a single rating by a single credit service means very little," said Ann Stevens, an economics professor at the University of California at Davis.

And Stevens lives in a state with a lower S&P rating than Spain and the same rating as Botswana and Aruba.

For economist Steve Levy of the Center for the Continuing Study of the California Economy in Palo Alto, the S&P's downgrade was simply a political statement - a message of sorts to politicians.

"So in that sense, it doesn't mean anything," Levy said.

What makes sense, said Levy, is not worrying about a letter grade but worrying about the broader economy.

In California's case, S&P's A- rating has been in place since January 2010. That's one reason Californians pay the highest sales tax in the nation and the highest state income taxes in the nation on income above $46,000.

On top of that, the state is saddled with an unemployment rate of 11.8%.

But the state's treasurer says California has passed a balanced budget and made tough spending cuts, steps the state hopes will improve its credit rating.

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Filed under: Economy
soundoff (53 Responses)
  1. Philip

    Chrissy? (from the road less travelled?) Don't forget about the 100 plus billion dollars that the ENRON corporation scammed from CA, who thanks to the governator Arnold, will never be able to recover these stolen funds. (he dropped the state's lawsuits vs. Enron)

    August 11, 2011 at 9:21 am | Report abuse |
  2. Philip

    Now, was Arnold a right-winger, or not? Aren't most actors liberal? Ronald Reagan was a liberal democrat for most of his life. But he flip-flopped so he could rule California instead of just acting like it. And it hasn't escaped notice that none of the democrat leaders tried to see to it that Enron returned the stolen funds instead of using them to build a huge ng powerplant in India, that purchases it's NG from The Carlyle Group's caspian basin holdings. President Obama knows about those, and does nothing about it...he won't even discuss it. ENRON stole our funds and invested them in India of all places. wtg leaders. Thank's for helping ENRON succeed.

    August 11, 2011 at 9:30 am | Report abuse |
  3. Philip

    ...and it wasn't just a handful of crooked men who helped ENRON. Our entire legal system let US down, and let ENRON get-away scott-free with our funds. Any one of the powerful men running our legal system could have stood-up and demanded that those funds be returned. Thousands of our leaders stood by and did nothing to recover those funds. Alll they did was prosecute an old man who was about to die anyway. Not one penny was returned.

    August 11, 2011 at 9:36 am | Report abuse |
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