S&P cuts U.S. rating outlook to negative
Moody’s says latest budget plans a turning point
NEW YORK (MarketWatch) — Standard & Poor’s cut its ratings outlook on the U.S. to negative from stable on Monday, lighting a fire under Washington’s deficit-reduction debate and sending stock markets sharply lower.
The rating agency effectively gave Washington a two-year deadline to enact meaningful change, just days after House Budget Committee Chairman Paul Ryan and President Barack Obama each outlined their plans for slashing debt. S&P nonetheless kept its highest rating, AAA, on the U.S.
Relative to Triple-A-rated peers, the U.S. has very large budget deficits and rising government indebtedness, and the path to addressing those issues is unclear, S&P analysts said.
They noted an increasing gap between a lack of action by U.S. fiscal policy makers and steps taken by its AAA-rated peers, even after the Republicans and Obama administration released their 2012 budget proposals.
“The fiscal profile of the U.S. is increasingly diverging from that of its AAA peers,” said David Beers, an S&P analyst, on a conference call. “This was the time to update our opinion.”