In an unusual Saturday conference call with reporters, senior S. P. officials insisted the ratings firm hadn’t overstepped its bounds by focusing on the political paralysis in Washington as much as fiscal policy in determining the new rating. “The debacle over the debt ceiling continued until almost the midnight hour,” said John B. Chambers, chairman of S. P.’s sovereign ratings committee.
Another S. P. official, David Beers, added that “fiscal policy, like other government policy, is fundamentally a political process.”
Administration officials at the White House and Treasury angrily criticized S. P.’s action as based on faulty budget accounting that discounted the just-enacted deal for increasing the debt limit.
The agreement set spending caps in the fiscal year that begins Oct. 1 and calls for a bipartisan Congressional “super committee” to propose more deficit reduction — for up to $2.5 trillion in combined savings over a decade.
“The bipartisan compromise on deficit reduction was an important step in the right direction,” the White House press secretary, Jay Carney, said in a statement on Saturday. “Yet, the path to getting there took too long and was at times too divisive. We must do better to make clear our nation’s will, capacity and commitment to work together to tackle our major fiscal and economic challenges.”
The ratings agency put additional pressure on the joint Congressional committee to find additional spending cuts, tax hikes or both to bring down the inexorably rising national debt.
Still, the posturing on Capitol Hill continued.
“Unfortunately, decades of reckless spending cannot be reversed immediately, especially when the Democrats who run Washington remain unwilling to make the tough choices required to put America on solid ground,” Speaker John A. Boehner, an Ohio Republican, said in a statement.
Senate Majority Leader Harry Reid said the downgrade affirmed the need for the Democratic approach, which would combine spending cuts with tax increases.
The decision, he said, “shows why leaders should appoint members who will approach the committee’s work with an open mind — instead of hardliners who have already ruled out the balanced approach that the markets and rating agencies like S. P. are demanding.”
Even as the ratings agency insisted on Saturday that its move shouldn’t have come as a shock, it reverberated around the world as political and financial leaders scrambled to assess its impact on the already troubled world economy.
China, the largest foreign holder of United States debt, said on Saturday that Washington needed to “cure its addiction to debts” and “live within its means,” just hours after the S. P. downgrade.
While Europeans had girded for a possible downgrade, the news that S. P. had actually yanked the United States’ AAA rating was nonetheless received with a degree of alarm in the corridors of power across the Continent. Finance Minister François Baroin of France questioned the move Saturday, noting that the figures used by S. P. didn’t match those of the Treasury, and overstated the federal debt by about $2 trillion.
Mr. Baroin said he found it curious that neither Moody’s nor Fitch, the two other major ratings agencies, had reached a similar conclusion. Moody’s has said it was keeping its AAA rating on the nation’s debt, but that it might still lower it.
“We have total confidence in the solidity of the American economy,” Mr. Baroin said in an interview on French radio. Nonetheless, he added, the decision confirms that the world’s most developed economies are confronted with the same urgent priorities: to lift growth and reduce public and private debt.
Jackie Calmes, Binyamin Appelbaum, Louise Story, Julie Creswell, Liz Alderman, Jack Ewing and David Barboza contributed reporting.
Article source: http://www.nytimes.com/2011/08/07/business/a-rush-to-assess-standard-and-poors-downgrade-of-united-states-credit-rating.html?partner=rss&emc=rss