Standard & Poor’s Managing Director John Chambers says the political haggling over the debt-reduction deal, and raising the debt ceiling at the 11th hour, caused the United States to lose worldwide credibility. Chambers also said Monday on MSNBC’s “Morning Joe” that this type of brinksmanship when the economy is at stake “does not exist with other governments.”
“We assume the joint select committee will deliver the goods — the $1.5 trillion in savings — and if they don’t, the sequestration mechanism will come into place,” Chambers said, referring to the across-the-board spending cuts that will take effect without a committee consensus. “So now what we’re really talking about is what kind of additional measures are going to be on the table.
“The program we have now is pretty much back-loaded over the 10-year period,” he said. “Now that we are in the situation that we’re in with the [downgrade] to AA+ we’re going to be looking for the actual goods to be delivered.”
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Chambers noted that five countries that lost their AAA rating got it back. But the process took time, and they instituted extreme measures to regain their financial credibility. America needs to do the same, he said.
“The five countries that lost their AAA rating that got it back — those are Australia, Canada, Denmark, Sweden, and Finland — they got it back over a period of nine to 18 years,” Chambers said. “All of them undertook significant fiscal reform that markedly reduced their level of debt to GDP — so we’re talking about reducing the level of debt to GDP.
“And all of them except for Australia undertook additional economic reforms that got their external position back into balance,” he said. “The gist of it is: There were both fiscal measures and economic measures that were enacted — it took time for those to show their fruit.”
Chambers was asked if the political failings in the way Congress and President Barack Obama dealt with the debt crisis — the main reason S&P cited for the downgrade were corrected — would that cause the credit rating agency to reconsider.
“If you corrected the political settings that would certainly improve the credit standing of the United States,” Chambers said. “But let’s not forget the damage that has been done to the credibility outside the United States about this debacle over raising the debt ceiling.
“It is unimaginable for your highest-rated government to be in a situation where they were 10 hours away from having a major cash flow problem,” he said. “I mean this simply does not exist with other governments. There’s only a handful of governments around the world that separate the budget process from the debt-approval process.”
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