Standard and Poor’s downgrade of United States credit had been coming for some time, according to Sen. Johanns, who said the nation has been living for too long off its credit card.
Johanns had worried about the possibility that America’s creditworthiness would take a hit. Now, Standard and Poor’s has dropped the nation’s credit rating from Triple A to Double A.
“What Standard and Poor’s is really saying is, ‘Look, somehow you have to pull together and find a solution to this problem, but until you do, we’re going to downgrade you,’” Johanns stated in an interview after an Open Coffee held at the Cornhusker Marriott in Lincoln.
Standard and Poor’s lowered the long-term sovereign credit rating on the United States to AA+ from AAA based on the country’s political risks and rising debt burden. It issued a summary of the action taken on its web site.
- The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.
- 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.
Johanns said the recent agreement approved by Congress to avoid default isn’t enough. He said Congress must cut deeply and rein in the federal budget.
“It will be the beginning of more unless we try really hard to find a solution to this debt crisis,” according to Johanns.
Discussion during the public meeting in Lincoln revealed the difficulties. Hostility to Congress and anger at current economic conditions bubbled up when the senator took questions about the audience of a little more than 60. While many opposed tax increases, some countered that the rich and corporations weren’t paying their fair share. One woman in attendance nearly shouted at the senator that the recent, drastic drops on Wall Street have ruined her 401k a month before she is to retire. At one point, the meeting nearly got out of control as participations pressed their points.
The stock market Monday dropped 634 points, the worst day for the market since the financial crisis in the fall of 2008. Stocks have lost 15% of their value in the last two-and-a-half weeks.
Johanns expressed no complaint about some of the sharp exchanges. He said such participation is a welcomed change.
“I’ll bet five years ago had we said we were going to do a town hall meeting on the federal budget, we’d have to call our best friends to get them to show up,” Johanns stated. “Now, you don’t have that problem.”
Johanns has an Open Coffee/Columbus Mayor’s Roundtable scheduled for the Columbus City Council Chambers beginning at 9:15am Wednesday. He is scheduled to be at the Stanton VFW at Noon and at the Nielson Community Center in West Point, beginning at 3pm. The public is welcome at all these events.
Johanns said he expects to hear a lot about Washington as he travels the state, little of it positive.
“People are worried. They’re very worried about the budget,” Johanns said.