Friday, August 05, 2011

U.S. Credit Rating Downgraded

Note that U.S. credit wasn't downgraded by Moody's or Fitch. Just S&P. The downgrade came with a $2 trillion error. In my humble opinion, this is just a consequence of the republican goal of tearing down government to get smaller government. Read Standards & Poor's rationale here.
However, after being presented with S&P's economic rationale for the downgrade, Treasury officials immediately pointed out a perceived error in the analysis, which found it had pegged discretionary spending levels at $2 trillion too high, compared to analysis from the Congressional Budget Office. That calculation error resulted in a much higher growth rate of the nation's debt-to-GDP ratio.

S&P acknowledged the error, and removed that portion of the analysis from its statement, but the firm ultimately decided later Friday evening to move forward with the downgrade, the source said. The Hill
Why did S&P downgrade U.S. credit? 
What does it mean? Congress just got downgraded.

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