S&P lowers US debt rating

S&P has downgraded the outlook for US government debt to negative, from stable, while reaffirming the current AAA rating. In plain English, the rating agency is telling the U.S. government to get its fiscal house in order, pronto, or face a downgrade that will materially affect the interest it has to pay to get people to buy its debt.

“We believe there is a material risk that U.S. policymakers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013; if an agreement is not reached and meaningful implementation is not begun by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer ‘AAA’ sovereigns.”

The downgrade does not make the United States Greece, or Portugal, not yet. But it is a step in that direction, as hard as it might be to conceptualize. In other words, the S&P downgrade is a warning to cut spending and deficits yourself, or have it done to you, against your will.

S&P lowers US debt rating