It’s unlikely that any political agreement reached in the coming months to cut the U.S. government’s budget deficit will go far enough, said David Beers, Standard & Poor’s global head of sovereign and international public finance ratings.
“It’s highly unlikely that whatever agreement that Congress and the administration might make over the next couple of months is going to be sufficient to turn the tide on the upward debt trajectory in the U.S., which you could argue is diverging from its triple-A peers,” Beers said in an interview on Bloomberg Television’s “InsideTrack” with Carol Massar, Peter Cook, Dominic Chu and Jon Erlichman.
S&P today lowered its outlook to “negative” from “stable” on the U.S.’s AAA rating, citing a “material risk” that President Barack Obama and congressional leaders might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013. The change signals the ratings company sees at least a 1 in 3 chance the top debt rating on the world’s largest economy will be cut within two years, Beers said.
Obama announced a plan April 13 to cut $4 trillion in cumulative deficits within 12 years through a combination of spending cuts and tax increases. He said he assigned Vice President Joe Biden to meet with Democratic and Republican congressional leaders with the aim of reaching an agreement by the end of June. The House passed a Republican budget that would reduce spending by more than $6 billion over a decade on April 15.