African Americans, we hope you got your inoculations against pneumonia. America has caught another cold. The United States credit rating has been downgraded for the first time in American history.
Standard & Poor, one of the three credit agencies, lowered the nation’s rating one notch below the pristine AAA, and S&P blames “political brinkmanship” in the prolonged and overblown debate about the debt ceiling with President Obama for the rating. S&P says it made the U.S. Government’s ability to manage its finances “less stable, less effective and less predictable.”
In short, S&P said that the nation’s debt crisis is really a political crisis.
“More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned,” an S&P statement reads.
“In recent months, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government’s debt dynamics any time soon,” the statement continued.
Moreover, S&P said the bi-partisan agreement that was reached in the 11th hour this past week was woefully insufficient of what they deemed was necessary to “tame the nation’s debt” over the long haul. They also believe the nation’s political leaders will have no chance of achieving more savings in the distant future.
Market analysts and economic pundits have guessed at a looming S&P downgrade for weeks and many might have already adjusted somewhat to account for it. Some have even predicted that the nation will spiral into another recession, which spells disaster for cities and states that are already up to their necks in debt. And the ramifications could be disastrous for the African American collective which is already in a perilous position from the current economic crisis.
The move has the potential to raise interest rates on the national debt – a move that could have the knock-on effect of raising interest rates across the US economy, from mortgages to car loans suggests the impact could be minimal, however, at least in the short term.
– terry shropshire
