Originally Posted by ElasticNinja
Surprisingly and shocklingly enough, the 100% debt to GDP ratio actually had nothing at all to do with the downgrade. Kinda shows how ridiculous the system is. Not that they werent spot on for downgrading based on the prevailing evidence of Republican inwillingness to mve on the Budget.
Anyway, I'm far more interested in Sarkozy vs Hollande right now.
Really? Here's the S&P report where they detail the downgrade:
The downgrade reflects our opinion that the fiscal consolidation plan
that Congress and the Administration recently agreed to falls short of
what, in our view, would be necessary to stabilize the government's
medium-term debt dynamics.
In other words, the US has a lot of debt and it only shows signs of increasing.
The outlook on the long-term rating is negative. We could lower the
long-term rating to 'AA' within the next two years if we see that less
reduction in spending than agreed to, higher interest rates, or new
fiscal pressures during the period result in a higher general government
debt trajectory than we currently assume in our base case.
So, if the slope of the debt increase is higher than they are currently projecting, they'll downgrade us more.
Yes, the political bickering was a cause as well, but it was not the only cause.