• News
  • Celebrities
  • Finance
  • Crypto
  • Travel
  • Entertainment
  • Health
  • Others

What does the S&P’s re-evaluation really mean?

The stock market dipped Monday following news that the S&P Index dropped its outlook on the United States’ credit rating from “stable” to “negative.” The cut isn’t an official assessment, but merely a hint at what may be in the cards for America’s credit rating if the national debt isn’t tackled.

So why is one changed word causing some prognosticators to panic?

The S&P’s negative outlook means the index is considering cutting America’s credit rating from AAA to AA. AA is hardly a terrible rating. The scale goes down to D, and the U.S. would be joining countries like Japan and China if its rating were knocked down to AA — hardly in the company of nations in dire straits. But even that marginal decline could have major consequences for America’s economic future.

S&P’s “sovereign credit ratings” for entire countries are essentially credit scores on a much larger scale: “credit ratings express the agency’s opinion about the ability and willingness of an issuer, such as a corporation or state or city government, to meet its financial obligations in full and on time,” in the words of the official S&P definition.

And just as wealthy individuals can nevertheless have terrible credit scores thanks to bad credit histories, so too can an entire country with a history of carrying excessive debt end up with a sub-par credit rating.

The greatest impact of a diminished American credit rating, as reported by Forbes Magazine’s Leonard Burman, would be its effect on the U.S. Treasury. Without a top-tier credit rating for the U.S., skittish investors at home and abroad could induce the Treasury to raise interest rates on government bonds. This would massively compound the national debt.

While America’s surging debt is hardly breaking news, the S&P issued its altered outlook as a result of the internecine battle between Democrats and Republicans over the budget. It’s not clear if a deal that would raise the debt ceiling, which, at $14.3 trillion, currently looms just above the $14.2 trillion national debt, would satisfy the S&P credit rating bureau.

Republican lawmakers have hailed the S&P evaluation as, in the words of House Majority Leader Rep. Eric Cantor (R-Va.), a “wake-up call” to the government, a sign that only significant spending cuts will pull the country out of a tailspin. House Speaker John Boehner, meanwhile, retweeted a Wall Street Journal editorial claiming that the re-evaluation could only have been a response to Obama’s budget speech last week, in which the president condemned Republican cuts as ideological.

Democrats have responded to the evaluation by contending that the parties will surely come to an accord over federal debt and spending, and by calling the credibility of the S&P index into question. A bipartisan congressional report on the root causes of the recession that was released last week cited inaccurate S&P credit ratings as a major factor in the mortgage crisis that precipitated the country’s economic fall.

Two of the more outspoken members of each party took to Twitter to respond to the news. Rep. Michele Bachmann (R-Minn.) said, “S&P confirms what we know: the government must slash spending. A debt ceiling hike will only worsen the problem”; Rep. Anthony Weiner (D-N.Y.) had a more colorful take, saying, “S&P paint a pessimistic picture. Oh yeah, those rating agencies are never wrong. #DidTheySendTheMemoFromJail?”

Discussion & Comments (0)

    Recent Articles

    • Things You Should Know about North America

      Things You Should Know about North America

      Get to know more about North America.

    • Eurovision 2010 Paula Seling Unpredictable Contest

      Eurovision 2010 Paula Seling Unpredictable Contest

      Paula Seling's experience on the Eurovision stage led her to declare that "Eurovision is an unpredictable contest". Which may explain the success of the young Lena from Germany, about whom the predictions before the event did not offer much chances for victory.

    • VIPRow.me - The Best Sports Streaming Website Today

      VIPRow.me - The Best Sports Streaming Website Today

      Have you ever contemplated creating a user-friendly site dedicated to sports-related free live streaming channels?

    • Learn How To Download, Install, And Use The Xnxubd 2022 Frame App

      Learn How To Download, Install, And Use The Xnxubd 2022 Frame App

      XNXUBD 2022 Nvidia users are able to watch thousands of videos and other contents online. XNXUBD 2022 Nvidia New is a piece of software that enables people to watch videos online without having to pay for memberships. On a graphics card, the XNXubd also provides some of the best gaming and virtual reality experiences.

    • Xvideostudio Video Editor Apk Free Download For Pc Full Version In 2022

      Xvideostudio Video Editor Apk Free Download For Pc Full Version In 2022

      A new edition of the Video Editor Apk for xVideostudio.Video Studio has all the latest features, including support for multiple video download formats in HD, FHD, and even 4K resolutions.

    • 9 Best Lotion For Masturbation - Popular Choice For 2022

      9 Best Lotion For Masturbation - Popular Choice For 2022

      Masturbation is a common activity for men and women. It's a natural and risk-free way to explore your body, experience pleasure, and release sexual tension.

    • Reasons Why You Need To Stop Watching Movies From Sflix

      Reasons Why You Need To Stop Watching Movies From Sflix

      Without having to sign up or pay anything, you can watch movies online for free with SFlix. It has more than 10,000 movies and television shows.

    • Coi Leray Mom And Dad's Family History & Wife, Explained

      Coi Leray Mom And Dad's Family History & Wife, Explained

      Coi Leray Collins (born May 11, 1997) is a rapper from the United States. Leray started publishing songs to SoundCloud in 2014, and in 2018 she released her breakthrough track "Huddy" as well as her first mixtape, Everythingcoz.

    • Listen And Download Music On MyFreeMP3 For Free

      Listen And Download Music On MyFreeMP3 For Free

      Are you in a bind and looking for a place to obtain free mp3 songs? Never again will you need to bother, since this article has everything necessary to obtain your solution. Download free music from MyfreeMP3.com, one of the world's most popular websites.