News / Economy

US Faces Possible Credit Rating Downgrade

US Faces Possible Credit Rating Downgrade
US Faces Possible Credit Rating Downgrade
Ken Bredemeier

U.S. President Barack Obama and Congress are engaged in an intense rush to settle on a plan to raise the country’s borrowing limit beyond the current total of more than $14 trillion.  It is an effort aimed at averting a possible default on the country’s financial obligations, something that might occur as early as next Tuesday.  Underlying those negotiations is the fear that even if the debt limit is increased, the country faces the prospect that its top-level credit rating might be downgraded.

Most financial analysts and government officials say that in the next few days the president and the congressional lawmakers will reach an agreement on the debt limit.  But experts also are looking at how much government spending Mr. Obama and Congress are willing to cut during the next decade.  That could be a key point in whether any of the three major private credit rating agencies - Standard & Poor’s, Moody’s or Fitch - might cut the country’s AAA credit standing.

If the country’s rating is downgraded, that could increase the borrowing costs for the government, perhaps by as much as $100 billion a year.  It also might lead to higher interest rates for consumers.  That, analysts warn, would inhibit the country’s economic recovery.

Standard & Poor’s says it is looking for the U.S. government to cut its spending by $4 trillion during the next decade.  In recent weeks, the president and House of Representatives Speaker John Boehner sought to forge a deal to cut that much, but those talks collapsed as factions in both Mr. Obama’s Democratic Party and Boehner’s Republican Party objected to various provisions being considered.  Now, the current debt limit plans Congress is considering would cut spending by a maximum of $3 trillion.

Whether a cut of that size would be sufficient for the United States to keep its top-level credit rating is unknown.

Standard & Poor’s President Deven Sharma was non-committal on Wednesday at a hearing on Capitol Hill.  He declined to comment on any of the plans being considered.

"We're waiting to see what the final proposal is, for our sovereign analysts to really analyze it more currently," said Sharma. "We are just commenting on what is the level of debt burden, what is the level of deficit that must meet the threshold to retain a AAA [rating].”

Sharma said that even if America's credit rating is downgraded, it would not mean his company thinks the United States is about to default on its financial obligations, something that has never happened.

"All it means is there is a low probability, a very low probability of a default," he said. "That's all it means.  And if you change the rating, it means that the risk level has gone up.  It doesn't mean it's going to default.  If you believe that, they would change it to a default status."

As the August 2 debt default deadline nears, analysts say that much of the discussion among lawmakers and President Obama will likely center on how much the debt limit will be increased.  But perhaps the bigger question is whether the country’s credit rating will remain where it has always been - at the very top.  It might take weeks for the answer to that question.

You May Like

Multimedia Obama Defends Immigration Action

Obama says with his executive action on immigration, enforcement resources will be focused on 'felons, not families; criminals, not children' More

US-Led Airstrikes in Syria Kill Over 900: Monitoring Group

British-based Syrian Observatory for Human Rights says the toll includes more than 50 civilians, five of them women and eight of them children More

Report: Obama Broadens US Combat Role in Afghanistan

The New York Times says resident Barack Obama has signed a classified order extending the role of US troops in Afghanistan for another year More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
New Skateboard Defies Gravityi
X
November 21, 2014 5:07 AM
A futuristic dream only a couple of decades ago, the hoverboard – a skateboard that floats above the ground - has finally been made possible. While still not ready for mass production, it promises to become a cool mode of transport... at least over some surfaces. VOA’s George Putic reports.
Video

Video New Skateboard Defies Gravity

A futuristic dream only a couple of decades ago, the hoverboard – a skateboard that floats above the ground - has finally been made possible. While still not ready for mass production, it promises to become a cool mode of transport... at least over some surfaces. VOA’s George Putic reports.
Video

Video Falling Gas Prices Impact US Oil Extraction

With the price of oil now less than $80 a barrel, motorists throughout the United States are benefiting from gas prices below $3 a gallon. But as VOA’s Kane Farabaugh reports, the decreasing price of petroleum has a downside for the hydraulic fracturing industry in the United States.
Video

Video Tensions Build on Korean Peninsula Amid Military Drills

It has been another tense week on the Korean peninsula as Pyongyang threatened to again test nuclear weapons while the U.S. and South Korean forces held joint military exercises in a show of force. VOA’s Brian Padden reports from the Kunsan Air Base in South Korea.
Video

Video Mama Sarah Obama Honored at UN Women’s Entrepreneurship Day

President Barack Obama's step-grandmother is in the United States to raise money to build a $12 million school and hospital center in Kogelo, Kenya, the birthplace of the president's father, Barack Obama, Sr. She was honored for her decades of work to aid poor Kenyans at a Women's Entrepreneurship Day at the United Nations.
Video

Video Gay Evangelicals Argue That Bible Does Not Condemn Homosexuality

More than 30 U.S. states now recognize same-sex marriages, and an increasing number of mainline American churches are blessing them. But evangelical church members- which account for around 30 percent of the U.S. adult population - believe the Bible unequivocally condemns homosexuality. VOA's Jerome Socolovsky reports that gay, lesbian, bisexual and transgender evangelicals are coming out. Backed by a prominent evangelical scholar, they argue that the traditional reading of the bible is wrong.
Video

Video Ebola Economic Toll Stirs W. Africa Food Security Concerns

The World Bank said Wednesday that it expects the economic impact of the Ebola outbreak on the sub-Saharan economy to cost somewhere betweenf $3 billion to $4 billion - well below a previously-outlined worst-case scenario of $32 billion. Some economists, however, paint a gloomier picture - warning that the disruption to regional markets and trading is considerable. Henry Ridgwell reports from London.
Video

Video Mexico Protests Escalate Over Disappearances

Protests in Mexico over 43 students missing since September continue to escalate, reflecting growing anger among Mexicans about a political system they view as corrupt, and increasingly tainted by the drug trade. Mounting outrage over the disappearances is now focused on the government of President Enrique Pena Nieto, accused of not doing enough to end insecurity in the country. More from VOA's Victoria Macchi.
Video

Video US Senate Votes Down Controversial Oil Pipeline - For Now

The U.S. Senate has rejected construction of a controversial pipeline to transport Canadian oil to American refineries. The $5 billion project still could be approved next year, but it faces a possible veto by President Barack Obama. As VOA’s Michael Bowman reports, the pipeline has exposed deep divisions in Congress about America’s energy future.
Video

Video Can Minsk Cease-fire Agreement Hold?

Growing tensions between government troops and separatists in eastern Ukraine further threaten a cease-fire agreement reached two months ago in the Belarusian capital of Minsk. Critics of U.S. policy in Ukraine say it is time the Obama administration gives up on that much-violated cease-fire and moves toward a new deal with Russia. VOA's Scott Stearns has more.
Video

Video Chaos, Abuse Defy Solution in Libya

The political and security crisis in Libya is deepening, with competing governments and, according to Amnesty International, widespread human rights violations committed with impunity. VOA’s Al Pessin reports from London.
Video

Video US Hosts Record 866,000 Foreign Students

Close to 900,000 international students are studying at American universities and colleges, more than ever before. About half of them come from Asia, mostly China. The United States hosts more foreign students than any other country in the world, and its foreign student population is steadily growing. Zlatica Hoke reports.
Video

Video Ferguson Church Grapples with Race Relations

Many white residents of Ferguson, Missouri, say they chose to live there because of the American Midwest community's diversity. So, they were shocked when a white police officer killed an unarmed black teenager in August – and shaken by the resulting protests and violence. Some local churches are leading conversations on how to go forward. VOA’s Ayesha Tanzeem reports.

All About America

AppleAndroid

World Currencies

EUR
USD
0.8050
JPY
USD
117.90
GBP
USD
0.6376
CAD
USD
1.1259
INR
USD
61.655

Rates may not be current.