Published: Friday, 15 Jul 2011 | 5:12 AM ET
Dennis Flaherty | Photographer’s Choice RF | Getty Images
The United States may be downgraded even with an agreement on the debt ceiling
John Chambers, chairman of Standard & Poor’s sovereign ratings committee, told Reuters in an interview that “this is the time” for the White House and Republicans to reach a credible budget agreement to tackle the country’s long-term debt problems.
“If you get a small agreement, that will lead to a downgrade,” Chambers warned. S&P revised in April its outlook on U.S. credit ratings to negative, which traditionally signals a downgrade in 12-18 months.
But “that horizon has shortened,” Chambers said, becauseit is very unlikely that Washington will be able to craft a meaningful budget agreement next year if it misses the chance now.
S&P is the only one of the big-three agencies with a negative outlook on U.S. ratings. Moody’s Investors Service on Wednesday placed U.S. ratings on review for a possible downgrade to account for the risk—which it considers low albeit growing—that the U.S. Treasury will miss debt payments in August if the debt ceiling is not raised.
S&P on Thursday also placed U.S. ratings on creditwatch, similar to a review for downgrade, because it also sees a growing risk of a ceiling-related technical default in August.