The Cato Institute just released this video explaining the possible consequences to a major ratings agency downgrading the US debt. From the video:
“But the rating agencies have explicitly said that the core issue risking the US credit rating isn’t the debt ceiling, but projected spending in the coming years and the growing risk of a default. One small rating agency, Egan Jones has already downgraded US debt, stating its concerns about the high level of debt to GDP — in excess of 100 percent, compared to Canada’s 35 percent. The plan adopted recently by congress and the president will not reduce spending or debt. In fact, the plan would allow the government to rack up several trillion dollars in new debt over the coming decade.”
Tonight, Standard & Poor’s did downgrade the United States’ government credit rating from AAA to AA+, citing the following in a press release:
“The outlook on the long-term rating is negative. We could lower the long-term rating to ‘AA’ within the next two years if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures during the period result in a higher general government debt trajectory than we currently assume in our base case.”
Watch:
This morning, the Daily Caller’s Mary Katharine Ham pointed out that Congress’ recent debt deal did not actually do anything to reduce spending or reduce the long-term debts held by the United States. Watch her (more light-hearted) video below: