S&P Issues an Upgrade of U.S. Sovereign Debt Along With a Warning

By:  Bob Adelmann
S&P Issues an Upgrade of U.S. Sovereign Debt Along With a Warning

The announcement by Standard & Poor's on Monday that it is revising its outlook upward is not only useless but counterproductive.

In the announcement by credit rating agency Standard & Poor’s on Monday that affirmed its AA+ rating of United States sovereign debt while revising upward its outlook from “negative” to “stable,” the agency explained that in the short run there has been some perceptible improvement in the country’s fiscal situation but in the long run serious problems remain. Unfortunately S&P failed to mention the real nature and depth of just how serious those problems are.

The agency said:

Our sovereign credit ratings on the U.S. primarily reflect our view of the strengths of the U.S. economy and monetary system, as well as the U.S. dollar's status as the world's key reserve currency. The ratings also take into account the high level of U.S. external indebtedness; our view of the effectiveness, stability, and predictability of U.S. policymaking and political institutions; and the U.S. fiscal performance.

It’s clear that the momentum of the U.S. economy continues to astonish pundits with its continued vitality despite efforts to slow it down so that it may be “comfortably merged” with less dynamic and economically vital countries into a one-world government.

The agency lauded the Federal Reserve for its policy actions at the beginning of the Great Recession, and Congress’ ability, at the very last minute, to come to an agreement that ended the Fiscal Cliff crisis. That so-called agreement is largely responsible for increased revenues to the federal government sufficient to cause the Congressional Budget Office (CBO) to revise downward its estimates of the annual national deficits in the near term. However, the problem that caused the agency to lower the country’s credit rating from AAA to AA+ in August 2011 is still there. 

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