On Monday, President Obama responded to the unprecedented Standard & Poor's downgrade of America's sovereign credit rating to AA+, arguing that "no matter what a ratings agency says, we will always be a AAA country." The U.S. needs to tackle its ballooning deficits, but that's a problem that is "eminently solvable," Obama said. Despite the downgrade, investors still seem to view U.S. Treasuries as the safest investment around, and the other two major ratings agencies — Fitch and Moody's — are keeping the U.S. at AAA for now. Meanwhile, S&P continues to defend its much-maligned analysis underpinning the downgrade. Does the U.S. deserve to have its AAA rating restored?
Forget S&P. America is still AAA: "S&P may no longer rate the nation AAA — but the market clearly does," says the New York Post in an editorial. Who are you going to believe: Investors, who are flocking to U.S. securities, or the ratings geniuses who helped tank the global economy by propping up mortgage-backed securities? Obama is right that "the downgrade was at best premature — and at worst unnecessarily destructive."
Actually, our politicians earned this downgrade: S&P deserves all the grief it's getting for its flubbed economic analysis and generally "horrific track record of risk analysis," says Annie Lowrey at Slate. But it downgraded the U.S. because of political risks, not economic dangers, and "that call seems to be completely correct." As the excruciating "debtpocalypse" debacle proved with months of bitter, ineffective negotiations in Washington, "we might be able to pay our debts, but it is far from clear that we will always be willing to pay them."
"S&P is right. It's Congress' fault"
Regaining AAA status is in our hands: "S&P probably will do nothing to the country's new AA+ rating" until after the 2012 election, says Douglas McIntyre at 24/7 Wall Street. The ratings agency and "the majority of economists" agree that we need to get our fiscal house in order by tackling soaring entitlement costs and raising taxes. Unless voters usher in politicians willing to commit to those hard sacrifices, we deserve S&P's rebuke. In other words, "America's situation is not hopeless unless Americans make it so."
"How the U.S. can get its triple-A rating back"
THE WEEK'S AUDIOPHILE PODCASTS: LISTEN SMARTER
- Why Mitt Romney is perfectly poised for a comeback in 2016
- Why is the West so afraid of Islam?
- The Nazi smart bomb that inspired China's most dangerous weapon
- The best places to find love — and lust — according to science
- Here's the schedule very successful people follow every day
- What would a U.S.-Russia war look like?
- Why GOP reformers are bound to fail
- 10 things you need to know today: July 31, 2014
- The mystery behind China's aggressive push into space
- Don't vote for Andrew Cuomo
Subscribe to the Week