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Debt Ceiling, Economy, The Budget

The S&P Downgrade – The Actual Report

You could listen to the talking heads explain why America’s debt was downgraded, or you could just read the report yourself.

The report is mainly an indictment of the current political climate in Washington.  It takes no position on methods to improve our fiscal situation (tax increases, spending cuts), nor does it imply endorsement of any economic theory (Keynsian stimulus, supply-side cuts).

More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.

There is also some commentary on the economic situation facing the United States.

We believe the sluggish pace of the current economic
recovery could be consistent with the experiences of countries that have hadfinancial crises in which the slow process of debt deleveraging in the private sector leads to a persistent drag on demand.

But don’t take my word for it; read it and draw your own conclusions.

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