America’s Credit Rating Was Just Cut: Now What?

On August 1, Fitch Ratings, one of the three primary credit rating agencies, downgraded the United States’ long-term credit rating from AAA to AA+, the second downgrade of U.S. debt in 12 years. In August 2011, Standard and Poor’s (S&P) downgraded U.S. debt in response to deficit spending and policies it believed “fell short of the amount necessary to stabilize the general government debt burden.” In its recent downgrade, Fitch stated: “The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management.” The verbiage of both was harsh, but the downgrades were arguably mild. A downgrade from…