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

Video One Year After Thai Coup, No End in Sight for Military Rule

Since carrying out the May 22, 2014 coup, the general has retired from the military but is still firmly in charge More

Goodbye, New York

This is what the fastest-growing big cities in America have in common More

Job-Seeking Bangladeshis Risk Lives to Find Work

The number of Bangladeshi migrants on smugglers’ boats bound for Southeast Asian countries has soared in the past two years 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.
Turkey's Main Opposition Party Hopes for Election Breakthroughi
X
May 22, 2015 10:23 AM
Turkey’s main opposition Republican People’s Party has sought an image change ahead of the June 7 general election. The move comes after suffering successive defeats at the hands of the Islamist-rooted AK Party, which has portrayed it as hostile to religion. Dorian Jones reports from the western city of Izmir.
Video

Video Turkey's Main Opposition Party Hopes for Election Breakthrough

Turkey’s main opposition Republican People’s Party has sought an image change ahead of the June 7 general election. The move comes after suffering successive defeats at the hands of the Islamist-rooted AK Party, which has portrayed it as hostile to religion. Dorian Jones reports from the western city of Izmir.
Video

Video Europe Follows US Lead in Tackling ‘Conflict Minerals’

Metals mined from conflict zones in places like the Democratic Republic of Congo are often sold by warlords to buy weapons. This week European lawmakers voted to force manufacturers to prove that their supply chains are not inadvertently fueling conflicts and human rights abuses. Henry Ridgwell reports from London.
Video

Video Class Tackles Questions of Race, Discrimination

Unrest in some U.S. cities is more than just a trending news item at Ladue Middle School in St. Louis, Missouri. As VOA’s Kane Farabaugh reports, it’s a focus of a multicultural studies class engaging students in wide-ranging discussions about racial tensions and police aggression.
Video

Video Mind-Controlled Prosthetics Are Getting Closer

Scientists and engineers are making substantial advances towards the ultimate goal in prosthetics – creation of limbs that can be controlled by the wearer’s mind. Thanks to sophisticated sensors capable of picking up the brain’s signals, an amputee in Iceland is literally bringing us one step closer to that goal. VOA’s George Putic reports.
Video

Video Afghan Economy Sinks As Foreign Troops Depart

As international troops prepare to leave Afghanistan, and many foreign aid groups follow, Afghans are grappling with how the exodus will affect the country's fragile economy. Ayesha Tanzeem reports from the Afghan capital, Kabul.
Video

Video Poverty, Ignorance Force Underage Girls Into Marriage

The recent marriage of a 17-year old Chechen girl to a local police chief who was 30 years older and already had a wife caused an outcry in Russia and beyond. The bride was reportedly forced to marry and her parents were intimidated into giving their consent. The union spotlighted yet again the plight of many underage girls in developing countries. Zlatica Hoke reports poverty, ignorance and fear are behind the practice, especially in Asia and Africa.
Video

Video South Korea Marks Gwangju Uprising Anniversary

South Korea this week marked the 35th anniversary of a protest that turned deadly. The Gwangju Uprising is credited with starting the country’s democratic revolution after it was violently quelled by South Korea’s former military rulers. But as Jason Strother reports, some observers worry that democracy has recently been eroded.
Video

Video California’s Water System Not Created To Handle Current Drought

The drought in California is moving into its fourth year. While the state's governor is mandating a reduction in urban water use, most of the water used in California is for agriculture. But both city dwellers and farmers are feeling the impact of the drought. Some experts say the state’s water system was not created to handle long periods of drought. Elizabeth Lee reports from Ventura County, an agricultural region just northwest of Los Angeles.
Video

Video How to Clone a Mammoth: The Science of De-Extinction

An international team of scientists has sequenced the complete genome of the woolly mammoth. Led by the Swedish Museum of Natural History in Stockholm, the work opens the door to recreate the huge herbivore, which last roamed the Earth 4,000 years ago. VOA’s Rosanne Skirble considers the science of de-extinction and its place on the planet
Video

Video Blind Boy Defines His Life with Music

Cole Moran was born blind. He also has cognitive delays and other birth defects. He has to learn everything by ear. Nevertheless, the 12-year-old has had an insatiable love for music since he was born. VOA’s June Soh introduces us to the young phenomenal harmonica player.

VOA Blogs

World Currencies

EUR
USD
0.8957
JPY
USD
120.93
GBP
USD
0.6393
CAD
USD
1.2199
INR
USD
63.470

Rates may not be current.