"BREAKING: S & P Downgrades U.S. Credit For First Time In History, Repeatedly Cites GOP Intransigence On Taxes"
Reuters reports: “The United States lost its top-notch AAA credit rating from Standard & Poor’s on Friday, in a dramatic reversal of fortune for the world’s largest economy.” The new rating is AA+.
In explaining their decision Standard & Poor’s cites both the decision by Republicans in Congress to turn the debt ceiling into a political football and the Republicans intransigence on tax increases. Some excerpts from the release:
[...]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.
[...]It appears that for now, new revenues have dropped down on the menu of policy options.
[...]The act contains no measures to raise taxes or otherwise enhance revenues, though the committee could recommend them.
[...]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.
Standard & Poors indicates that they could improve their rating for the U.S. if “the 2001 and 2003 tax cuts for high earners lapse from 2013 onwards, as the Administration is advocating.”
Wall Street Journal: “A spokesman for Rep. Eric Cantor, the House GOP majority leader, declined to comment Friday night.”