Standard & Poor’s downgrades US debt rating to AA+. This is the same Standard & Poor’s who, along with other credit rating services, didn’t see the risk in most Collateralized Loan Obligations and other “financial products” with almost no value added until the roof caved in.
That said, Standard & Poor’s news release does make a number of important points. For example,
Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act.
Not everything in Standard & Poor’s thinking involved the revenue side of things but a lot of it sure did. Another major theme was the craziness of it all.
The political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy. Despite this year’s wide-ranging debate, in our view, the differences between political parties have proven to be extraordinarily difficult to bridge, and, as we see it, the resulting agreement fell well short of the comprehensive fiscal consolidation program that some proponents had envisaged until quite recently.
So we all will pay for the actions of those who are still holding our economy hostage. And a company that didn’t seem to understand what the word junk meant in the phrase “junk bonds” delivered the news.
Here’s S&P’s full report.