(The Hill) — Standard & Poor’s laments the possibility cuts to entitlement programs won’t materialize and the decreasing likelihood of new tax revenues.
The decision by Standard & Poor’s to downgrade the U.S. credit rating to “AA+” at once laments the possibility that cuts to entitlement programs will not materialize and the decreasing likelihood of new tax revenues. But it appears to give more weight to the need for more spending cuts, as it warns that a further credit rating downgrade is in the cards if the U.S. does not trim spending.
In contrast, while the report indicates that new tax revenues would help mitigate the debt crisis, failing to find these revenues does not immediately put the U.S. at risk of another downgrade.
Specifically, the report warns directly that a further downgrade to “AA” status could occur within the next two years if there is “less reduction in spending” than what was agreed in the debt ceiling agreement. S&P said one factor that could lead to this second downgrade is if the minimum $1.2 trillion in spending cuts under the debt ceiling agreement does not occur.