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S&P's Beers: It Was Our Duty To Downgrade US
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S&P cut the long-term US credit rating by one notch to AA-plus on concerns about the government's budget deficits and rising debt burden. The decision could eventually raise borrowing costs for the American government, companies and consumers.
"We take our responsibilities very seriously, and if at the end of our analysis the committee concludes that a rating isn't where we believe it should be, it's our duty to make that call," David Beers told Reuters in an interview.
S&P has been under a lot of fire from the Obama administration for basing its decision and analysis too much on the acrimonious debt-ceiling debate that led to an eleventh-hour agreement on Tuesday to avert a US default.
Government sources have also accused the agency of making a $2 trillion error in its calculations about US finances, and later removing that number from its estimates while sticking to its plan to cut the US credit rating.
Beers, who is the head of sovereign ratings at S&P, acknowledged that the agency's decision was highly influenced by a change in Washington's "political dynamics" that hampered members of Congress from reaching a more comprehensive plan to cut the deficit.
"From the standpoint of fiscal policy, the process has weakened and became less predictable than it was," he said.
"That's the story around the difficulty highlighted in the debt-ceiling debate, cobbling together some type of fiscal policy choices."
Asked about news reports that there had been a back and forth between the agency and the government during the past 24 hours over the justification of the decision, S&P spokesman John Piecuch said the agency always gives a debt issuer the opportunity to review the announcement before it is made.
"They can go through it and look for numbers, look for calculations -- that is what happened," Piecuch said.
In a statement released later, S&P confirmed it changed its economic assumptions after discussions with Treasury, but said it did not affect the decision to downgrade the country.
Using the Treasury's preferred assumptions on the pace of discretionary spending growth, S&P revised its estimate for the net general government debt over the next 10 years to $20.1 trillion. This was down from the figure of $22.1 trillion in the original assumption.
Both estimates were based on fiscal scenarios provided by the nonpartisan Congressional Budget Office, S&P said.
"The primary focus (of the rating review) remained on the current level of debt, the trajectory of debt as a share of the economy, and the lack of apparent willingness of elected officials as a group to deal with the U.S. medium-term fiscal outlook," S&P said in the statement.
"None of these key factors was meaningfully affected by the assumption revisions to the assumed growth of discretionary outlays, and thus had no impact on the rating decision."
Beers said one contributing element to the decision was the downward revision of U.S. GDP numbers a week ago. The data showed that the US economy almost stalled in the first half of the year.
"The recession was deeper than what everybody thought a year ago and we think that this raises the possibility that the recovery will continue to be weak."