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CRFB_Reacts_to_SP_Downgrade

CRFB_Reacts_to_SP_Downgrade

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Published by: Committee For a Responsible Federal Budget on Aug 06, 2011
Copyright:Attribution Non-commercial

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10/15/2013

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1899 L Street NW Suite 400 Washington, DC 20036
 
• Phone: 202
-986-
2700 • Fax: 202
-986-
3696 •
www.crfb.org 
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CRFB Reacts to S&P DowngradeAugust 6, 2011
Yesterday, Standard & Poor
’s
(S&P) announced that it has lowered thelong-term credit rating of the United States from AAA to AA+, which isthe first such downgrade in American history. According to S&P, thedowngrade resulted from the fact that the recent debt deal fell well shortof stabilizing the debt and brought into question the capacity of thepolitical system to agree to further needed deficit reduction.
“This is a heck of a wake up call,” said Maya MacGu
ineas, President ofthe Committee for a Responsible Federal Budget.
“It’s like when youralarm clock goes off too loud, and you can’t find the button to turn it off.
 We have been ignoring the slew of warnings from the major ratingagencies and others from the IMF to the Fed, for way too long whilefailing to seriously address our debt challenges. Now we have this fiscalscarlet letter until we make the needed reforms to get our debt under
control.”
In explaining the downgrade, S&P notes that policymakers appearunwilling to consider any new revenues or any significant changes to
entitlements, stating that “elected officials remain wary of tackling the
structural issues required to effectively address the rising U.S. public debt
 burden.” According to their projections, the debt of peer AAA countries
will be on a declining path by mid-
decade while the United States’ debt
will continue to grow.
“We need at least a $4 trillion deficit reduction plan—
probably more, and
the recent legislation only gets us a fraction of the way there,” saidMacGuineas. “Now is the time to pivot, we are going to have to find away to “go big”.”
 
“Between now and December policymakers will either be involved in a
serious national discussion over how to bring our debt under control or
else another round of theater and brinksmanship,” said MacGuineas. “We
still have a real opportunity to enact serious entitlement changes, taxreform, and an economic growth strategy. But if we fail, I fear other ratingagencies will follow suit with S&P, with economically dangerous
consequences.”

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