Standard & Poor’s announced Friday night it had lowered the long-term credit rating for the U.S. from AAA to AA+ — pointing to the “political brinksmanship” during the recent Congressional debate over raising the debt ceiling as a key factor in the historic downgrade.
The move triggered a new round of partisan finger-pointing just days after Congress passed a compromise deal to reduce the deficit and then left town for the August recess. The credit rating company said the $2.1 trillion agreement “fell well short” of a comprehensive fiscal consolidation program that some had sought.
Initial Congressional reaction to Friday night’s downgrade focused less on the action itself and more on political sniping and what Congress might do later this year. With Members out of town until September, party leaders offered no suggestion that Congress should respond quickly to possible fallout from the S&P action.
In a pointedly partisan statement, Speaker John Boehner (R-Ohio) called the announcement “the latest consequence of the out-of-control spending that has taken place in Washington for decades.” He said that Republicans have “listened to the voices of the American people and worked to bring the spending binge to a halt.” And he added, “The Democrats who run Washington remain unwilling to make the tough choices required to put America on solid ground.”
Senate Majority Leader Harry Reid (D-Nev.) said the S&P action reinforced the need for a balanced approach consisting of both spending cuts and new revenues to reduce the deficit. He used the downgrade to highlight the importance of the makeup of the bipartisan House-Senate committee mandated by the debt ceiling deal.
“This makes the work of the joint committee all the more important, and shows why leaders should appoint members who will approach the committee’s work with an open mind,” Reid said, “instead of hardliners who have already ruled out the balanced approach that the markets and rating agencies like S&P are demanding.”
House Minority Leader Nancy Pelosi (D-Calif.) and House Minority Whip Steny Hoyer (D-Md.) also focused their response on the new committee, with Hoyer calling for the panel to “put everything on the table” to return to a fiscally sustainable path.
Coming three days after the conclusion of the exhausting showdown over the debt ceiling increase, the S&P announcement was a thumbs-down on Washington from a major Wall Street voice.
“The political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed,” the S&P wrote. “The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy. Despite this year’s wide-ranging debate, in our view, the differences between political parties have proven to be extraordinarily difficult to bridge.”