When Standard & Poor’s lowered the nation’s credit rating in early August to AA+, it marked the first time since 1917 that the U.S. had lost its top-level AAA rating.
Winthrop University Economics professor Dr. Bob Stonebraker says, in light of the fact that the two other major credit rating services Moody’s and Fitch kept the nation’s AAA rating, Standard & Poor’s probably acted prematurely in lowering it.
However, despite the criticism, Stonebraker defends the service’s view of the divisive political climate in Washington–which delayed raising the nation’s debt ceiling, refused to raise revenues as major criteria for taking the action.
Stonebraker points out the U.S. House, with its present Republican majority, has been dead set on not closing tax loopholes to generate more revenue. GOP members view the action as tax increases.
Stonebraker says, as the debt ceiling debate dragged on to the August 2 deadline, the country was in real danger of defaulting on its obligations and that threat was enough for Standard & Poor’s to take the action to lower the nation’s credit rating. He adds the volatility of the U.S. market and those overseas will continue if the gridlock in Washington continues. He said that could send the nation tumbling back into another recession.