Standard & Poor’s, the folks who downgraded U.S. debt from AAA to AA+ last summer, are warning that a further downgrade could be in store unless the U.S. gets serious about reducing the deficit. But the ratings agency says its possible downgrade might come any time in the next 6-24 months…and even then, not before the November election:
“What the U.S. needs is not so much a short-term fiscal tightening, but it has to have a credible medium-term fiscal plan,” said Chambers, managing director of sovereign ratings. “That is going to have to say something about entitlements, and that is probably going to have to say something about revenues.”
The nation needs a short, medium and long-term plan to bring down the debt and deficit. But the political class has shown that it is largely allergic to making such plans, even when the penalty for not doing so could mean trouble not just for the Fed’s, but also for states like Virginia, whose AAA rating is dependent to a degree on Washington’s fiscal priorities.
But there’s also the question of whether S&P should be nosing into politics in the first place. Even with the agency’s oddly-cropped time line, one could argue that they are trying to make deficit reduction — be it through tax increases (they do mention “revenue”) or entitlement changes — the big issue in the campaign…and that any candidate who doesn’t have an iron-clad reform plan could trigger a downgrade.
That sounds like SuperPac ad fodder.
