Standard & Poors Downgrades U.S. Credit Rating – Another Heavy Blow to the Fragile U.S. Economy

Earlier today, on the heels of two volatile days of trading on Wall Street and other Stock Markets around the world, Standard & Poors delivers yet another blow to the already fragile economy of the United States. The S&P downgraded the credit rating of the United States from a AAA rating to a AA+ rating.

The move knocks the U.S. rating down from that shared by Canada and the U.K. down to the level of investment confidence shared by countries like Belgium and New Zealand. This is the first time since 1917 that the credit rating of the United States has been lowered from its initial rating at that time of AAA.

While the rating is lower, it is still above that of both China and Japan which have S&P ratings of AA-. Analysts indicate that this change in the credit rating will mean higher interest rates for consumers across the board including mortgages, student loans and other lines of credit.

Standard & Poors issued the downgrade based on, among other factors, the time it took congress to come to an agreement to raise the dept ceiling as well as the plan which they agreed upon to get the measure passed. Without increasing revenue from sources like additional taxes, and relying only on minor spending cuts, the current plan is simply not sustainable.

S&P analysts agree that a plan which increases the debt ceiling by an amount substantially larger than the amount of cuts to spending, with not additional revenue, will only stall the inevitable. Spending more that the country takes in, while placing more debt on the U.S. “credit card”, only digs the country deeper into a hole with no hope of recovery. With this approach, the U.S. will eventually have to increase the debt ceiling again.

To maintain their integrity, Standard & Poors had no choice but to lower the credit rating of the country as they would have for any business so poorly mismanaging their finances.