Was America’s credit rating downgraded for the first time ever under Obama’s watch?

As part of my series analyzing the article suggesting that Obama has changed the economy for the worse, let’s now move on to the eighth claim: that America’s credit rating was downgraded for the first time ever under Obama’s watch.

Yes, America’s credit rating was downgraded from AAA to AA+ by S&P in 2011 so this claim is TRUE. The downgrade followed a record high deficit and public debt (See previous discussion.) but the actual reason for the downgrade was perceived risk that the government would default on its debts due to political posturing.

From S&P’s Downgrade Announcement:

“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. Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government’s debt dynamics any time soon.”

and

“The political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy. Despite this year’s wide-ranging debate, in our view, the differences between political parties have proven to be extraordinarily difficult to bridge, and, as we see it, the resulting agreement fell well short of the comprehensive fiscal consolidation program that some proponents had envisaged until quite recently. Republicans and Democrats have only been able to agree to relatively modest savings on discretionary spending while delegating to the Select Committee decisions on more comprehensive measures.”

This is akin to a credit agency reducing the rating of a married couple. They have good incomes but they also have significant spending, which would be fine but all they do is argue instead of presenting any real plan for repaying their mortgage.

CONCLUSION: Yes, America’s credit rating was downgraded during Obama’s administration – but the fault lies with both parties and especially in Congress. I hope everyone remembers how Congress (both parties) failed us in this incident when choosing to vote for/against congressional incumbents this election day.

Published by Bryan Guido Hassin

These are the musings of a global cleantech entrepreneur. This blog began as a way to document my experience during the IMD MBA in Switzerland and now is the place where I publish eclectic thoughts on business, politics, fitness, entertainment, travel, wine, sports, and . . . whatever else is top of mind.

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