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IPFS News Link • Economy - Economics USA

Late to The Party ... Once Again

• http://dailybell.ch/
 

The only thing more ridiculous than S&P's too little too late semi-downgrade of U.S. sovereign debt was the market's severe reaction to the announcement. Has S really added anything to the debate that wasn't already widely known? In any event, S&P's statement amounts to a wakeup call to anyone who has somehow managed to sleepwalk through the unprecedented debt explosion of the last few years.

Given S&P's concerns that Congress will fail to address its long-term fiscal problems, on what basis can it conclude that the U.S. deserves its AAA credit rating? The highest possible rating should be reserved for fiscally responsible nations where the fiscal outlook is crystal clear. If S&P has genuine concerns that the U.S. will not deal with its out of control deficits, the AAA rating should be reduced right now.

By its own admission, S&P is unsure whether Congress will take the necessary steps to get America's fiscal house in order. Given that uncertainty, it should immediately reduce its rating on U.S. sovereign debt several notches below AAA. Then if the U.S. does get its fiscal house in order, the AAA rating could be restored. If on the other hand, the situation deteriorates, additional downgrades would be in order.


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