Standard & Poor's, one of the country's most influential credit-rating agencies, "fired a warning shot on Monday" about the growing U.S. debt load. S&P downgraded its credit outlook for the U.S. from "stable" to "negative," meaning it believes there is a one-in-three chance it will lower the government's sterling "AAA" rating within two years. The agency pointed to the political gridlock in Washington, and questioned whether President Obama and Republicans would agree on a plan to lower the deficit and reduce the national debt before the 2012 elections. Will S&P's downgrade get Obama and the Republicans on the same page?
This should spur Washington to act: Hopefully, this warning will act "as a catalyst" for politicians to agree on a "credible" package of reforms, says Mohammed El-Erian, CEO of bond giant PIMCO, in the Financial Times. Failure to do so would weaken the dollar and could drive up borrowing costs, "thereby undermining investment, employment and growth." The "time has come" for the U.S. "to take better control of its fiscal destiny — for the sake of American society and for the well being of the global economy."
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