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Why S&P downgrades U.S. credit rating (2)

By Ji Zhenyu, Yu Liang (Xinhua)

16:02, August 06, 2011

LOSE FAITH ON POLICY MAKERS

S&P questioned U.S. policy makers' eagerness to solve the debt problems by bipartisan efforts. Also, the rating agency blamed Democrats and Republicans for ignoring its earlier warnings.

On April 18, S&P assigned a negative outlook to U.S. then-AAA rating, warning the debt ceiling should be raised to avoid a default. However, the action didn't draw much attention from policy makers who had decisive power to take quick measures.

The U.S. debt would reach its ceiling of 14.3 trillion on Aug. 2. If the debt ceiling was not raised, the United States would face an unprecedented default.

Through long, testy negotiations between the two parties in Congress, the plan was finally passed just before the Aug. 2 deadline. However, patience and trust in U.S. policy makers diminished as time went by.

"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," S&P said.

Also, as the difficulties behind the debt problems still loom ahead, S&P worried that U.S. policy makers could not react properly and effectively to the "government debt dynamics" any time soon, given their recent performance on dealing with the debt ceiling.

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