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

Italian Red Cross Chief: Don't Label Migrants 'Illegal'

Speaking at the United Nations headquarters in New York Wednesday Francesco Rocca says migrants are victims, not criminals More

US Intel Officials Cautious About New IS Threat

Threat, said to have been posted by alleged American member of Islamic State terror group, says Sunday’s attack in Texas ‘is only the beginning’ More

Eyes in Sky Monitor Weather, Predict Epidemics

Satellites track storms, population movements, ocean warming to predict disease conditions 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.
Mass Grave Exposes Entrenched Trafficking in Thailandi
X
May 05, 2015 5:50 PM
Police in southern Thailand have found two more camps believed to have held human trafficking victims -- one containing a buried skeleton. This comes just days after officials announced arrests in connection with the grisly discovery of 26 bodies in a mass grave at another location. Officials suspect as many as 400 mostly ethnic Rohingya from Myanmar were being held for ransom at the remote camp near the Malaysian border. Steve Sandford reports on developments in the case.
Video

Video Mass Grave Exposes Entrenched Trafficking in Thailand

Police in southern Thailand have found two more camps believed to have held human trafficking victims -- one containing a buried skeleton. This comes just days after officials announced arrests in connection with the grisly discovery of 26 bodies in a mass grave at another location. Officials suspect as many as 400 mostly ethnic Rohingya from Myanmar were being held for ransom at the remote camp near the Malaysian border. Steve Sandford reports on developments in the case.
Video

Video Russia's 'Victory Day' Glory Over Nazis Overshadowed by Ukraine

ussia is preparing to commemorate the 70th anniversary of the end of World War II, known since the Soviet era as “The Great Patriotic War,” with a massive parade on May 9th of military hardware and millions of medals handed out to veterans or their relatives. But critics say the Soviet-style display of power and nationalism overshadows tragic scars during and after the war that still influence politics and foreign policy, especially in the current Ukraine crisis.
Video

Video WWII Anniversary Brings Old Friends and New Worries

The 70th anniversary of the end of World War II has special significance, with Russia becoming more assertive in Ukraine and sending its military planes to the edges of western countries’ airspace. Changes in the geostrategic balance and the transatlantic relationship are felt across the continent, not least in German towns that have hosted U.S. military bases since the defeat of Nazi Germany. VOA’s Al Pessin visited Schweinfurt, Germany, where a large base closed last year.
Video

Video Abraham Lincoln Funeral Re-created for 150th Civil War Anniversary

Over the last four years, commemorative events to mark the 150th anniversary of the U.S. Civil War have brought thousands of visitors to battlefields and historic landmarks across the country. As VOA's Kane Farabaugh reports from the Midwest state of Illinois, the final event in the Civil War's sesquicentennial honors the final journey home of the slain American President, Abraham Lincoln.
Video

Video Campaign Raises Money to 'Uncuff' Journalists

Beginning Sunday – World Press Freedom Day – the Committee to Protect Journalists, a private U.S. group, is launching a campaign to bring attention to their plight and encourage efforts to free them. Deborah Block reports.
Video

Video Volunteers Pull Together to Aid Baltimore Riot Victims

Calm has returned to Baltimore, Maryland, after authorities lifted an overnight curfew imposed almost a week ago to stem the rioting that followed the funeral of Freddie Gray - the 25-year-old black man who died of spinal injuries suffered while in police custody. Six police officers, three of them African-American, have been charged in connection with his death. Baltimore is now trying to get back to normal, in part with the help of volunteers who responded to calls to help those in the city'
Video

Video From Aleppo To Berlin: Band of Brothers Escapes Civil War

Hundreds of thousands of Syrians have fled the civil war in their country and journeyed to Europe by boat across the Mediterranean. It is a terrifying ordeal with dangers at every turn. A group of Syrian brothers and their friends describe their ordeal as they try to reach Germany. VOA's Henry Ridgwell reports. ...
Video

Video Rural Nepal Suffers Brunt of Quake’s Devastation

Nepal is still coming to grips with the full extent of the devastation and misery caused by last Saturday’s magnitude 7.8 earthquake. Some of the hardest-hit communities have been cut off by landslides making it difficult to assess the precise toll. A VOA News crew has been among the first to reach a few of the smaller, remote communities. Correspondent Steve Herman reports from the Sindhupolchak district, east of Kathmandu, which suffered greatly in Nepal’s worst quake in more than 80 years.
Video

Video Obama Praises Work of 3 Immigrant Journalists

President Barack Obama met with three immigrant journalists at the White House Friday to praise them for their work ahead of World Press Freedom Day, May 3. In attendance: Dieu Cay (his pen name) a blogger from Vietnam recently released from prison; Lily Mengesha from Ethiopia who was harassed and detained for exposing the marrying off of young girls as child brides, and Fatima Tlisova, an ethnic Circassian from the North Caucasus region of Russia, who works for VOA's Russian Service.
Video

Video Middle East Atheist Channel Defies Taboo

In Egypt, a deeply religious country in a deeply religious region, atheism is not only taboo, it is dangerous. It is sometimes even criminal to publicly declare nonbelief. Despite the danger, one group of activists is pushing back with a new online channel that defends the right not to believe. VOA’s Heather Murdock reports.
Video

Video Nepal Quake Survivors Tell Their Stories

Against all hope, rescuers have found a few more survivors of the devastating earthquake that hit Nepal last Saturday. Mountain climbers and hikers trapped in remote places also have been airlifted to safety, and aid is finally reaching people in the areas closest to the quake's epicenter. Survivors and rescuers are now recounting their experience. Zlatica Hoke has this story.
Video

Video Lessons for Germany, Europe Remain on Anniversary of WWII's End

The 70th anniversary of the end of World War II will be marked May 8-9 in all European countries except Germany, which lost the war. How is the war viewed there, and what impact is it still having? From Berlin, VOA’s Al Pessin reports.
Video

Video Nepal Town Destroyed By Quake Counts Itself Lucky

Foreign search teams on Wednesday began reaching some of the communities outside Kathmandu that suffered worse damage than Nepal’s capital from last Saturday’s massive earthquake. VOA Correspondent Steve Herman is in Sankhu - a town of about 10,000 people - where there is relief the death toll is not higher despite widespread destruction.
Video

Video Somali Hotel Chain Owner Strives to Make a Difference

Many in the Somali diaspora are returning home to make a new life despite the continuing risks. Since 2011 when a military campaign against Al-Shabab militants began making progress, members of the diaspora community have come back to open hospitals, schools, hotels, restaurants and other businesses. Abdulaziz Billow in Mogadishu profiles the owner of a chain of hotels and restaurants who is helping to bring change to the once-deadly Somali capital.
Video

Video Child Migrants Cross Mediterranean Alone, Face Unknown Future

Among the thousands of migrants making the deadly journey by boat to Europe, there are unaccompanied girls and boys. Some have been sent by relatives to earn money; others are orphaned or fleeing war. From a shelter for young migrants in the Sicilian town of Caltagirone, VOA's Henry Ridgwell reports.

VOA Blogs

World Currencies

EUR
USD
0.8967
JPY
USD
120.22
GBP
USD
0.6616
CAD
USD
1.2116
INR
USD
63.662

Rates may not be current.