S&P: Rating of U.S. Debt Not Falling Because The Of Debt Ceiling, Its The Spending

When Standard and Poor’s moved up their timeframe for a downgrade on U.S. sovereign debt from three to five years to just 90 days, Dave Beers, Director of the Sovereign Debt Division explained that the rating of U.S. debt is not on the verge of falling because the debt ceiling debate in Congress hasn't been resolved:

The debt ceiling is not the central preoccupation that we have. We put the United States on credit watch because we’re growing less certain that this political debate can be resolved. This was not merely about the debt ceiling.

It’s the long-term dynamics of reining in government spending that is the sticking point. Raising the debt ceiling (or not) is almost beside the point. It’s the spending, and it always has been. Added the report from S&P, “If an agreement is reached to raise the debt ceiling but nothing meaningful is done in terms of deficit reduction, the US would like have its rating cut to the AA category.”

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