* Further U.S. downgrade feared within two years
* Tax increases vs spending cuts divide parties
WASHINGTON (Reuters) - U.S. political parties on
Sunday traded blame for the country's loss of its top-tier AAA
credit rating from Standard & Poor's, raising doubts lawmakers
can still find a common ground to solve the country's debt
S&P on Friday cut the long-term U.S. credit rating by one
notch to AA-plus on concerns about the government's budget
deficit and rising debt burden, a decision that put
Washington's dysfunctional politics under the spotlight.
"It's a partial wake up call. I think this is without
question, a Tea Party downgrade," Democratic Senator John Kerry
told NBC's "Meet the Press." "This is one of the most telling
moments in the history of our country right now."
Kerry, who was the Democratic Party's 2004 presidential
candidate said the conservative Tea Party movement had held the
country hostage by consistently shooting down President Barack
Obama's plan that would have cut the country's debt by $4
trillion over ten years.
"In the end they thought the hostage was worth ransoming,"
But Republican Senator John McCain said the downgrade was
an indictment of Obama's leadership.
"I agree there is dysfunction in our system and a lot of
that has to do with failure of the president of he United
States to lead," said McCain who lost the 2008 race for the
White House to Obama.
"The president never came forward with a plan, there was
never a specific plan. There was always that leading from
Congress last month engaged in an ugly fight over cutting
spending and raising taxes to reduce the government's debt
burden and allow its statutory borrowing limit to be raised.
Last Tuesday, Obama signed legislation designed to reduce
the fiscal deficit by $2.1 trillion over 10 years. But that was
well short of the $4 trillion in savings S&P had called for as
a good "down payment" on fixing America's finances.
"We could have reached an agreement a lot earlier, but
members of the House of Representatives had a mandate from last
November," said McCain. "For them to agree to tax increases and
spending increases was obviously a repudiation of the mandate
that felt they had."
TAXES VERSUS SPENDING
The parties are still poles part on how to tackle the
deficit problem, without derailing an already fragile recovery.
While Kerry pushed for tax increases and more investment in
infrastructure as part of the solution, McCain saw tax hikes as
not viable and targeted for cuts mandatory spending such as
Medicare health care for the elderly instead.
House of Representatives budget panel chairman Paul Ryan
said on "Fox News Sunday" he was pessimistic on the outlook for
a compromise with rival Democrats. "I don't think a grand
bargain is going to come out of this, because they're not
putting health care reform on the table." He said he hoped for
a down payment on debt reduction through action of a special
This is hardly comforting, specially as the S&P repeated
its warning on Sunday that there was a one in three chance of a
further credit rating downgrade over the next six months to two
"We have a negative outlook ... from six months to 24
months," Standard & Poor's managing director John Chambers said
on ABC's "This Week."
"And if the fiscal position of the United States
deteriorates further or if the political gridlock becomes more
entrenched, then that could lead to a downgrade. The outlook
indicates at least a one in three chance of a downgrade over
The political gridlock in Washington over addressing the
long-term fiscal problems facing the United States comes
against the backdrop of slowing economic growth.
The economy barely grew in the first half of the year and
former Federal Reserve Chairman Alan Greenspan warned growth
could further slow down.
"With all of this bickering going on, the economy is
slowing down," said Greenspan told NBC's "Meet the Press". "I
don't see a double-dip, but I do see it slowing down. This
deficit problem that sits out there is much larger than we've
(Reporting by Lucia Mutikani, Anna Yukhananov and Jackie
Frank; Editing by Jackie Frank)
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