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. banasy©

    California has a worse rating than *SPAIN*???
    Whoa.

    August 10, 2011 at 5:55 pm | Report abuse |
  2. jj

    Yea no big this is flippin laughable coming from people from cali

    August 10, 2011 at 6:03 pm | Report abuse |
  3. Mary

    Who FOUND the 3 trillion dollars that the American people have lost during the past 3 years? I see something BIG in our future. I've been saying this for years. Am I the only person who thinks outside the box?

    August 10, 2011 at 6:20 pm | Report abuse |
  4. banasy©

    Hi, jj, what's shaking?

    August 10, 2011 at 6:20 pm | Report abuse |
  5. jj

    Chillin at the pool mama how are you on this miserable scorchin day you are a chica right lol

    August 10, 2011 at 6:25 pm | Report abuse |
  6. Adam

    Yes take it from Cali.. No longer will we set the bar high. Their bar is set at "eh"... Why try harder? Great job Cali and CNN

    August 10, 2011 at 6:28 pm | Report abuse |
  7. HelenHull102951

    "Its no big deal" ? How is that? Our credit cards will have a higher interest rate. We as a nation are going broke. Our dollar is headed to becoming worth less than a peso. The global stock market has gone down because of a lower credit rating And "its no big deal". The federal government should put those californian economists before a firing squad.

    August 10, 2011 at 6:36 pm | Report abuse |
  8. jj

    IKR you crack me up! Can you believe the kind of nonsense they put on the blogs here! i know we disagree on a lot of issues but thats whats great about america. we can agree to disagree without wanting to cut each others head off

    August 10, 2011 at 6:38 pm | Report abuse |
  9. banasy©

    @jj:
    Yep, I'm a chica, lol!
    Lot cooler here today, thankfully!

    August 10, 2011 at 6:42 pm | Report abuse |
  10. Adam

    @banasy©: Your daughter as hot as you are? Lol You can always tell what a girl will be like by looking at her mom..

    August 10, 2011 at 6:47 pm | Report abuse |
  11. jj

    You have fans mama lol

    August 10, 2011 at 6:51 pm | Report abuse |
  12. Obama

    I'm going to give the congress a participation ribbon just for trying.. Good job..

    August 10, 2011 at 6:57 pm | Report abuse |
  13. Name*adam

    Who cares about s&p there standard is very poor,hello usa is the most powerful nation in the word,in terms of everything. So very p,s can go to hell

    August 10, 2011 at 7:01 pm | Report abuse |
  14. William Lustgarten

    AGREE.
    NOT VERY IMPORTANT.
    S&P WAS GIVING AAA RATINGS TO MORTGAGE BACKED SECURITIES.
    THEY LACK TOTAL CREDIBILITY FOR RATING ANYONE.
    MAYBE AFTER THEY RATE THEMSELVES AS C- AND THEY RENOVATE ALL THEIR GUIDELINES
    APOLOGIZE TO THE US PUBLIC AND DENOUNCE THE PARTICIPANTS IN THE FIRM THAT
    WERE IN COHOOTS WITH GOLDMAN SACHS AND THE OTHER BANKS<
    MAYBE THEY WILL HAVE SOME CREDIBILITY,
    GOOD LUCK

    August 10, 2011 at 7:01 pm | Report abuse |
  15. Lyndsie Graham

    I wonder if anybody in California recently thought of seceding from the rest of the U.S. like the Southern States did just before the Civil War? It's an idea worth floating around and being debated upon. Maybe the state of California would be better off since the Pentagon wouldn't be able to bleed it white like the rest of the country!

    August 10, 2011 at 7:11 pm | Report abuse |
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