S&P cuts long-term outlook for US debt to negative

S&P cuts long-term outlook for US debt to negative

Credit: AP

FILE - In this file photo taken March 18, 2011, specialist Anthony Campagna, center, works at his post on the floor of the New York Stock Exchange. World stocks sank Monday, April 18, 2011, a day after China's central bank undertook yet another anti-inflation move in an attempt to get control of fast-rising consumer prices.(AP Photo, file)

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Associated Press

Posted on April 18, 2011 at 8:08 AM

Updated Monday, Apr 18 at 10:46 AM

 

NEW YORK (AP) -- Standard & Poor's Ratings Service cut its outlook Monday on the United States' sovereign debt, saying there is a one in three chance it will downgrade the rating on the debt in the next two years.

The agency lowered the long-term outlook to "Negative" from "Stable."

It reaffirmed its investment-grade credit ratings on the U.S. long- and short-term debt itself, but said the ratings are at risk from the country's growing deficit.

S&P said the U.S. has a high-income, diversified and flexible economy that has helped it to encourage growth while containing inflation.

But the country's ballooning deficit could offset those positives over the next two years.

The agency noted that the deficit grew to 11 per cent of gross domestic income in 2009. That is much higher than the average of two per cent to five per cent in the previous six 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. By that time, the measures won't go into effect until the fiscal year 2014.

"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.

Mary Miller, assistant secretary for financial markets, said S&P "underestimates the ability of America's leaders to come together to address the difficult fiscal challenges facing the nation."

President Barack Obama and Congress are working on ways to reduce budget deficits over the long term, she said.

(Copyright 2011 by The Associated Press. All Rights Reserved.)

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