The S&P downgrade had Democrats fuming. Senate Banking Chairman Tim Johnson (D-S.D.) noted that U.S. debt rallied strongly Monday even as the stock market dropped, showing that investors do not doubt they will be repaid.
“This irresponsible move by S&P may, however, have spillover effects that tax the American people by increasing interest rates on home loans, credit cards and car loans, and by increasing the cost of finance for some state and local governments,” Johnson said. “I am deeply disappointed in S&P’s decision to enter into the game of political punditry.”
Outside advocates for a large deficit reduction package tried to use the downgrade as a spur for compromise that would include big entitlement changes and new tax revenue.
Former Senate Budget Chairman Pete Domenici (R-N.M.) and former White House Office of Management and Budget Director Alice Rivlin, co-chairmen of the Bipartisan Policy Center’s Debt Reduction Task Force, sent a letter to leaders of both parties urging them to deal with both revenue and entitlements, as well as pass a large upfront payroll tax cut to spur the economy through the new joint committee.
“This committee has a historic opportunity to come to a broad bipartisan solution that will control debt and ensure America’s future prosperity,” they wrote.