S&P: We'll Drop U.S. Debt Rating From AAA to D in August

Standard & Poor's, the credit rating agency, will drop the United States' debt rating from a pristine triple-A to a pathetic D if Republicans and Democrats cannot agree on a deal by August 4. The Atlantic Wire has more:

S&P's managing director John Chambers explained, "If the U.S. government misses a payment, it goes to D. ... That would happen right after August 4, when the bills mature, because they don't have a grace period."

Three frames to understand this issue:

(1) Greece and the United States are on the verge of default. We have AAA debt rating from S&P. Greece has a CCC rating. Greece's problem is pure economics. Their government doesn't save enough money to pay back their creditors. The U.S. government's problem is pure politics. We're choosing not to meet our obligations despite extremely low borrowing rates.

(2) S&P is supposed to predict missed debt payments. So why not downgrade the U.S. if it thinks we're going to default in four weeks? The only answer that makes sense is: They don't think we'll default, and this warning is a stern bluff.

(3) The debt ceiling is an amazingly stupid instrument, an artificially imposed limit to U.S. borrowing that could, in a month's time, inflict serious damage on the struggling U.S. economy. Its abolition should be a part of any budget deal. (If only.)

Read the full story at The Atlantic Wire.

Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

Saving the Bees

Honeybees contribute more than $15 billion to the U.S. economy. A short documentary considers how desperate beekeepers are trying to keep their hives alive.

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.

blog comments powered by Disqus

Video

How to Cook Spaghetti Squash (and Why)

Cooking for yourself is one of the surest ways to eat well.

Video

Before Tinder, a Tree

Looking for your soulmate? Write a letter to the "Bridegroom's Oak" in Germany.

Video

The Health Benefits of Going Outside

People spend too much time indoors. One solution: ecotherapy.

Video

Where High Tech Meets the 1950s

Why did Green Bank, West Virginia, ban wireless signals? For science.

Video

Yes, Quidditch Is Real

How J.K. Rowling's magical sport spread from Hogwarts to college campuses

Video

Would You Live in a Treehouse?

A treehouse can be an ideal office space, vacation rental, and way of reconnecting with your youth.

More in Business

Just In