S&P cuts long-term outlook for US debt to negative
WASHINGTON – Standard & Poor's Ratings Service downgraded its outlook Monday on U.S. government debt, expressing unprecedented doubts over the ability of Washington to bring the massive federal budget deficits under control.
The agency lowered the long-term outlook to "Negative" from "Stable," saying there is a one in three chance the United States could lose its top investment rating on its debt in the next two years.
S&P said it has little confidence that the White House and Congress will agree on a deficit-reduction plan before the fall 2012 elections and doubts any plan would be in place until after 2014.
The government is on pace to run a record $1.5 trillion deficit this year, the third consecutive deficit exceeding $1 trillion. President Barack Obama and congressional Republicans are sparring over how to reduce the nation's red ink. Their differences over where to cut have put a crucial decision over raising the nation's debt limit in jeopardy.
"We see the path to agreement as challenging because the gap between the parties remains wide," said Standard & Poor's credit analyst Nikola G. Swann.
Stocks plunged after the rating agency lowered its outlook The Dow Jones industrial average fell more than 200 points in afternoon trading.
S&P reaffirmed its investment-grade credit ratings on the U.S. long- and short-term debt itself. But it said the U.S. government is in danger of losing the top ranking if it doesn't come up with a credible plan for reducing its debt. [...]
Time is running out. It never should have been allowed to get this bad.