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

Guatemala Mudslide Death Toll Rises to 86

Death toll is expected to continue to rise as emergency crews dig through tons of earth for an estimated 350 people still missing More

Debris Found in Search for Missing Ship

Objects located Sunday have not yet been confirmed to be from the 240 meter container ship, El Faro, which disappeared in the eye of Hurricane Joaquin, according to US Coast Guard More

Survivor: Gunman Spared 'Lucky One' to Give Police Message

Law enforcement official says a manifesto of several pages was recovered; contents not revealed More

This forum has been closed.
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.
Russia’s Syria Involvement Raising Concerns in Europei
Luis Ramirez
October 02, 2015 4:45 PM
European nations are joining the United States in demanding that Russia stop targeting opposition groups other than the Islamic State militants as Russian warplanes continue to conduct raids in Syria. The demand came in a statement from Britain, France, Germany, Qatar, Saudi Arabia, Turkey and the United States Friday. VOA Europe correspondent Luis Ramirez reports.

Video Russia’s Syria Involvement Raising Concerns in Europe

European nations are joining the United States in demanding that Russia stop targeting opposition groups other than the Islamic State militants as Russian warplanes continue to conduct raids in Syria. The demand came in a statement from Britain, France, Germany, Qatar, Saudi Arabia, Turkey and the United States Friday. VOA Europe correspondent Luis Ramirez reports.

Video First Self-Driving Truck Debuts on European Highways

The first automated semi-trailer truck started its maiden voyage Friday, Oct. 2, on a European highway. The Daimler truck called 'Actros' is the first potentially mass-produced truck whose driver will be required only to monitor the situation, similar to the role of an airline captain while the plane is in autopilot mode. VOA’s George Putic reports.

Video Nano-tech Filter Cleans Dirty Water

Access to clean water is a problem for hundreds of millions of people around the world. Now, a scientist and chemical engineer in Tanzania (in East Africa) is working to change that by creating an innovative water filter that makes dirty water safe. VOA’s Deborah Block has the story.

Video Demand Rising for Organic Produce in Cambodia

In Cambodia, where rice has long been the main cash crop, farmers are being encouraged to turn to vegetables to satisfy the growing demand for locally produced organic farm products. Daniel de Carteret has more from Phnom Penh.

Video Migrant Influx Costs Europe, But Economy Could Benefit

The influx of hundreds of thousands of refugees and migrants is testing Europe’s ability to respond – especially in the poorer Balkan states. But some analysts argue that Europe will benefit by welcoming the huge numbers of young people – many of them well educated and willing to work. Henry Ridgwell reports from London.

Video Botanists Grow Furniture, with Pruning Shears

For something a bit out of the ordinary to furnish your home, why not consider wooden chairs, crafted by nature, with a little help from some British botanists with an eye for design. VOA’s Jessica Berman reports.

Video New Fabric Helps Fight Dust-Related Allergies

Many people around the world suffer from dust-related allergies, caused mainly by tiny mites that live in bed linen. Polish scientists report they have successfully tested a fabric that is impenetrable to the microscopic creatures. VOA’s George Putic has more.

Video Burkina Faso's Economy Deeply Affected by Political Turmoil

Political turmoil in Burkina Faso over the past year has taken a toll on the economy. The transitional government is reporting nearly $70 million in losses in the ten days that followed a short-lived coup by members of the presidential guard earlier this month. The crisis shut businesses and workers went on strike. With elections on the horizon, Emilie Iob reports on what a return to political stability can do for the country's economic recovery.

Video Fleeing Violence, Some Syrians Find Refuge in Irbil

As Syrians continue to flee their country’s unrest to seek new lives in safer places, VOA Persian Service reporter Shepol Abbassi visited Irbil, where a number Syrians have taken refuge. During the religious holidy of Eid al-Adha, the city largely shut down, as temperatures soared. Amy Katz narrates his report.

Video Nigeria’s Wecyclers Work for Reusable Future in Lagos

The streets and lagoons of Africa's largest city - Lagos, Nigeria - are often clogged with trash, almost none of which gets recycled. One company is trying to change that. Chris Stein reports for VOA from Lagos.

Video Sketch Artist Helps Catch Criminals, Gives a Face to Deceased

Police often face the problem of trying to find a crime suspect based on general descriptions that could fit hundreds of people in the vicinity of the crime. In these cases, an artist can use information from witnesses to sketch a likeness that police can show the public via newspapers and television. But, as VOA’s Greg Flakus reports from Houston, such sketches can also help bring back faces of the dead.

Video Thailand Set to Build China-like Internet Firewall

Thai authorities are planning to tighten control over the Internet, creating a single international access point so they can better monitor content. VOA Correspondent Steve Herman reports from Bangkok on what is being called Thailand’s own "Great Firewall."

Video Croatian Town’s War History Evokes Empathy for Migrants

As thousands of Afghanistan, Iraqi and Syrian migrants pass through Croatia, locals are reminded of their own experiences with war and refugees in the 1990s. VOA's Daniel Schearf reports from the town of Vukovar, where wartime scars still are visible today.

Video Long Drought Affecting California’s Sequoias

California is suffering under a historic four-year drought and scientists say even the state's famed sequoia trees are feeling the pain. The National Park Service has started detailed research to see how it can help the oldest living things on earth survive. VOA’s George Putic reports.

VOA Blogs

World Currencies


Rates may not be current.