Democratic Underground - The Atlantic: Report: S&P Preparing to Downgrade the U.S.—But Why?

From The Atlantic:

The rating agency has some reasonable rationale for cutting the rating, but could politics really cause the nation to default?

After a http://www.theatlantic.com/business/archive/2011/08/no-double-dip-yet-julys-117-000-jobs-may-calm-fears/243154/">mildly encouraging employment report, Washington's politics might manage to derail the U.S. economy anyway. Compromising to narrowly avoid a debt ceiling puncture and to cut deficits by $2 trillion might not have been enough. Reports surfaced late Friday that government officials say that rating agency Standard and Poor's is preparing to downgrade the U.S. debt rating to AA+ or AA. Would this move by S&P be bold and prescient or insane and misguided?

At this point, the news is still developing. Jake Tapper at ABC news http://blogs.abcnews.com/politicalpunch/2011/08/govt-official-us-expecting-sp-downgrade.html">reports that a "government official" says that the U.S. has been notified. He writes:

Officials reasons given will be the political confusion surrounding the process of raising the debt ceiling, and lack of confidence that the political system will be able to agree to more deficit reduction. A source says Republicans saying that they refuse to accept any tax increases as part of a larger deal will be part of the reason cited.

We should take last part of this leak with a grain of salt until we see what S&P actually has to say. It's hard to believe that S&P would really single out one party over the other. Presumably, S&P would tell the Treasury that it was planning to downgrade -- not the Republican House Speaker. So this probably comes from an Obama administration source. And if we can be sure of anything, no party wants the blame for a U.S. downgrade.

--snip--

Much more at the link! Obviously, as they say, to be taken with a grain of salt. I gotta say, though, it would be an interesting twist to have a downgrade...blamed squarely on the Republicans and Teatalitarians within their ranks as causing it.

PB

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