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©

    Hi, leeintulsa.
    What's the haps?

    August 10, 2011 at 8:43 pm | Report abuse |
  2. banasy©

    @Adam:
    I know.
    I'm just bragging.
    It's all good! 😉

    August 10, 2011 at 8:45 pm | Report abuse |
  3. leeintulsa

    Hi, banasy :). Another day in paradise. We've finally found a pattern of storms and cooler air. 'course, now people are losing power and homes to wind and falling power poles and trees.. But that's normal 😉

    August 10, 2011 at 8:57 pm | Report abuse |
  4. S&P

    The new standard is poor. Poor is the new rich. See how we polished that t_ur_d?

    August 10, 2011 at 9:02 pm | Report abuse |
  5. Donald Duck Wealthy Finance Guru And Business Owner

    Money can't buy happiness or love, however money can put some lovely young ladies through school, or get me some hot gold digger girlfriends and that would make me just so happy that words cannot express the glee or jubilation. When love fails to find you, perhaps you should find money and then find a few bi curious girls who are going to use you for money. At least you don't have to invest emotions into someone who is just going to treat you like garbage anyways. At least both parties know they are being used to serve a purpose. Then when you drive your Aston Martin past all the girls who didn't want you when you wanted love you can push your model gf's head down so she can gag on your stick as you look at the other girl and laugh. Note to the chef.. Please stop sending all the rotten lobster tail my way.. I will only send it back. That is all. Class dismissed.

    August 10, 2011 at 9:19 pm | Report abuse |
  6. Cesar

    I think that the better a country's credit the more financial sound they are. Oh well, leave it up to Californians to be care free; even their economists. @banasy: Hi.

    August 10, 2011 at 9:21 pm | Report abuse |
  7. gung hoe

    And like cali is anybody to listen to anywys

    August 10, 2011 at 9:31 pm | Report abuse |
  8. Philip

    Wow. California rates with Botswana. Impressive. Very impressive...especially for CA. (the 6th largest economy on earth)

    August 10, 2011 at 10:03 pm | Report abuse |
    • Clint Eastwood

      Did it ever occur to you Philip, that California's ratings just might improve if it seceeded from the rest of the country, well did it? I didn't think so. Well it did occur to me and I think it's a good idea considering the crummy job that the right-wing idiots are doing in Washington these days!!

      August 10, 2011 at 10:12 pm | Report abuse |
  9. Dear Satan Snake

    I really don't know what all this jealousy and anger is all about, but you've got everything a guy could want and there is no reason for you to hate me. Be thankful you've got everything you could ever want here on earth. There's no point in trying for my soul, because you'll never get it, but you will have your smoking hot girls, your money, your admiration from others and so much more.

    August 10, 2011 at 10:13 pm | Report abuse |
  10. Philip

    @Clint Eastwood...I especially enjoyed the part where you are reading the inscription on your wife's headstone. Remember? Nobody understood what she saw in you. I did though, and cried my eyes out. Most of the audience laughed. (from Unforgiven) But no, it would be stupid for an "A" to cecede from the AA-plus. Dontcha think?

    August 10, 2011 at 10:36 pm | Report abuse |
  11. gung hoe

    Good post banasy. I mean you said it all,thank you.

    August 10, 2011 at 10:37 pm | Report abuse |
  12. Philip

    Maybe they could have afforded to cecede had the Governator Arnold not dropped CA's hundred-billion dollar lawsuits vs. ENRON. wtg Arnold! Now they can't leave US.! he he...though it wouldn't break my Colorado heart if they did. Heck. I wish that Colorado was it's own nation. We'd still need to import sheephearders though. And fruitpickers. Even Colradans are too lazy for these tasks.

    August 10, 2011 at 10:54 pm | Report abuse |
  13. jj

    banz Cali couldnt survive a second without the federal teet they would be dark as north korea and to those of you believing that the tea party has anything to do with californias demise you are sadly mistaken for it has been the bleeding heart liberals who have broken the state

    August 11, 2011 at 7:22 am | Report abuse |
  14. chrissy

    hey banasy,hey phillip how goes it with u. as for california someone plz correct me if im wrong but wasnt it not so long ago they were issueing iou's to state employees? that doesnt sound to me like a very prosperous or well run state. may wanta rethink!!

    August 11, 2011 at 7:25 am | Report abuse |
  15. chrissy

    & the state is broke for the very same reason as most other states, overspending by state gov & not having equal taxation. simple facts not determined by rocket scientists. & our gov could fix most of it by getting out of stupid wars that we neednt be in

    August 11, 2011 at 7:35 am | Report abuse |
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