The U.S. lacks a medium-term fiscal plan that would remove the negative outlook on the nation’s rating, let alone help it regain its top credit grade, according to John Chambers of Standard & Poor’s.
America has had an AA+ rating with a negative outlook since Aug. 5 when the New York-based unit of McGraw-Hill Cos. stripped the nation of its AAA ranking, citing the government’s failure to agree on a plan to reduce deficits. Countries that lose the top ranking historically have taken about 9 years to regain the grade.
“To get back to stable you would have to have some confidence that a medium-term plan would be brought forward, a bit more robust than we have to date,” Chambers, managing director of sovereign ratings at S&P, said today on Bloomberg Radio’s “Bloomberg on the Economy” with Sara Eisen and Michael McKee. “We don’t expect too much before the election. You could have some positive moves after November.”
Bond investors ignored the downgrade Aug. 5, driving Treasury yields to the lowest levels in history, amid concern the U.S. economy was stalling and as Europe’s debt crisis intensified. Treasuries have returned 4.6 percent since the rating cut as of Feb. 2, according to Bank of America Merrill Lynch index data.
“We don’t see that there’s a credible medium-term framework in the offering,” Chambers said. The U.S. was cut in part because of “the invidious and basically pointless debate that we had over the debt ceiling that put us within 10 hours of a major cash flow problem. That usually is just not conduct you see at a AAA level.”