Living in a Post-Downgrade World

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Photo: Nicholas Kamm/AFP/Getty Images

It's the morning after the morning after Standard & Poor's saw fit to downgrade the U.S. government's credit rating, and still no one knows how severe the consequences of the action will be. No one's going to let that stop them from complaining though.

First in line, the S&P, who are annoyed at the criticism they've received for the downgrade. The company line was that this was as much a decision about the current political climate as it was about fiscal policy (which based on what we saw unfold over the past few weeks makes sense). "We have been saying for some time that the fiscal trajectory of the United States was on a bad path and that the political gridlock in Washington leads us to conclude that policymakers don't have the ability to proactively put the public finances of the United States on a sustainable footing," John Chambers, the S&P’s managing director, told ABC's This Week. Chambers also warned that there was a chance that the country's debt rating could fall even further.

Back at the White House, officials are very sore at the S&P, (a) because they were caught off guard by the downgrade and (b) because of that little $2.1 trillion dollar math mistake. While the S&P maintains that the government knew a downgrade was coming (they did change country's credit outlook to negative back in April), the White House insists they were blindsided by the decision. "We didn't think they would actually do it," an unnamed administration official told the New York Times. As for that little math mistake, Gene Sperling, director of the White House's national economic council, said it showed "an institution starting with a conclusion and shaping any arguments to fit it."

In the House and Senate, both parties acted exactly as you'd expect, saying that the downgrade proved they were both right. Senate Majority Leader Harry Reid felt it showed that spending cuts must be paired with higher revenues. On the other side of the political landscape House Speaker John Boehner said the situation showed that Democrats were still unwilling to make the tough decisions required to reverse the current economic situation.

As expected potential Republican presidential candidates also seized on news of the downgrade. Speaking at a rally in Iowa, Michele Bachman made clear that she felt the president was to blame. “You were AWOL. You were missing in action,” she told the crowd, ignoring the fact that she probably shouldn't be attacking anyone for being missing in action at the moment.

As for the rest of the world, China, the largest foreign holder of U.S. debt, wasn't too excited about the downgrade and called on the U.S. to stop spending so much money. But not everyone wanted to criticize America; the French Finance Minister François Baroin pointed out that the other two main rating agencies, Moody's and Fitch, hadn't seen fit to downgrade the U.S.'s credit rating yet.

Earlier: S&P Strips U.S of AAA Credit Rating, Slams Political Gridlock

Amid Criticism on Downgrade of U.S., S.&P. Fires Back
[NYT]
S&P exec warns further downgrade [Politico]