We tend to think of our grand old country as invulnerable.
The idea of the U.S.’s failing is unthinkable. Except that it is entirely thinkable, more so every day, if we don’t get the country’s wild spending under control.
Our vulnerability became official today: Standard & Poor has cut the United States’ ratings outlook from positive to negative. The market took a nosedive on this historic action.
Like anybody else who has retirement funds in the market, I feel a sick sensation in the pit of my stomach this morning. I am genuinely frightened about my savings, as are many Americans.
Still, I am glad that in taking this action S & P said some things that need to be said. The S & P made it clear that our present path cannot continue. Here is what CBS Market Watch says:
The rating agency effectively gave Washington a two-year deadline to enact meaningful change, just days after House Budget Committee Chairman Paul Ryan and President Barack Obama each outlined their plans for slashing debt. S&P nonetheless kept its best rating, AAA, on the U.S.
Relative to Triple-A-rated peers, the U.S. has very large budget deficits and rising government indebtedness, and the path to addressing those issues is unclear, S&P analysts said.
“More than two years after the beginning of the recent crisis, U.S. policy makers have still not agreed on how to reverse recent fiscal deterioration or address longer-term fiscal pressures,” said Standard & Poor’s credit analyst Nikola G. Swann. See text of S&P decision.
If a meaningful agreement to address medium- and long-term budgetary challenges isn’t reached and implementation hasn’t begun by 2013, it would render the U.S. fiscal profile meaningfully weaker than its AAA-rated peers, analysts said.
Here is the response from the Treasury Department:
The Treasury Department said S&P’s decision underestimates lawmakers’ ability to cut the country’s debt, and that both major political parties agree that the deficit needs to be reduced.
Do you believe that? I don’t. Rep. Paul Ryan has bravely put forward a serious plan to curtail spending and reform entitlements. The President of the United States in his address on the budget last week put forward a political plank with lots of nasty remarks about Ryan. I expect the president will have an intensely political response to this latest bad news, too.
Moody’s gives both Ryan’s and the president’s plans a shot at cutting the deficit, but it didn’t soft pedal the consequences of failure:
The means to reduce the debt differ significantly, “and it is politically out of the question that either of them will be adopted as proposed,” [Steven Hess of Moody’s] said. “Despite these uncertainties, we view the changed parameters of the debate, with broadly similar goals as to government debt levels, as a turning point that is positive for the long-term fiscal position of the U.S. federal government.”
Would that be a tactful way of saying even Democrats are talking about cutting?
But there must cuts and soon.