S&P cuts US outlook to negative on fiscal worry
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- JohnA
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NEW YORK — Standard & Poor's Monday downgraded its credit outlook for the United States, citing a risk that policymakers may not reach agreement on a plan to slash the huge federal budget deficit.
S&P said the move signals at least a one-in-three chance that it could cut its long-term rating on the United States within two years.
"Because the U.S. has, relative to its AAA peers, what we consider to be very large budget deficits and rising government indebtedness, and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable," S&P said in a release.
The move will ratchet up the pressure on the Obama administration and Congress to come up with an aggressive long-term plan to chop a nearly $1.5 trillion deficit, equal to about 9.8 percent of output. It could push up U.S. borrowing costs and put further pressure on the dollar and the government's ability to finance the budget shortfall.
A downgrade to the U.S. AAA credit rating would also cause a spike in mortgage rates and tighten credit conditions across the economy. That would likely derail the economy's recovery from the worst recession since World War II.
"The U.S. debt situation got a reality check this morning from the move by S&P," said John Kilduff, partner at Again Capital in New York. "Only precious metals will be seen as attractive in the aftermath of the outlook downgrade."
http://www.msnbc.msn.com/id/42643641
S&P said the move signals at least a one-in-three chance that it could cut its long-term rating on the United States within two years.
"Because the U.S. has, relative to its AAA peers, what we consider to be very large budget deficits and rising government indebtedness, and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable," S&P said in a release.
The move will ratchet up the pressure on the Obama administration and Congress to come up with an aggressive long-term plan to chop a nearly $1.5 trillion deficit, equal to about 9.8 percent of output. It could push up U.S. borrowing costs and put further pressure on the dollar and the government's ability to finance the budget shortfall.
A downgrade to the U.S. AAA credit rating would also cause a spike in mortgage rates and tighten credit conditions across the economy. That would likely derail the economy's recovery from the worst recession since World War II.
"The U.S. debt situation got a reality check this morning from the move by S&P," said John Kilduff, partner at Again Capital in New York. "Only precious metals will be seen as attractive in the aftermath of the outlook downgrade."
http://www.msnbc.msn.com/id/42643641
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- groups:
- Community, US Politics
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- tags:
- national debt, Budget Deficit
