Laurence J Kotlikoff, Columnist

U.S. Government Merits a Junk Credit Rating: Laurence Kotlikoff

August 17, 2011 at 12:00 AM UTC

Laurence J. Kotlikoff is an economics professor at Boston University and the author of "Jimmy Stewart Is Dead: Ending the World's Ongoing Financial Plague With Limited Purpose Banking." Kotlikoff served as a senior economist on President Ronald Reagan's Council of Economic Advisers, and is now a research associate at the National Bureau of Economic Research and the president of Economic Security Planning, Inc., a maker of financial planning software. He received a bachelor's in economics from the University of Pennsylvania and a doctorate in economics from Harvard University. He is also the coauthor of "The Coming Generational Storm: What You Need to Know about America's Economic Future" and "Spend 'til the End: The Revolutionary Guide to Raising Your Living Standard - Today and When You Retire."

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Politicians and investors say Standard & Poor’s made a mistake when it cut the U.S.’s credit rating from AAA to AA+. I agree. I wonder why S&P didn’t take it all the way down to CCC.

The country’s political leaders, from President Barack Obama on down, are alternately decrying S&P’s hubris and blaming their opponents. Big investors who hold lots of Treasuries are also on S&P’s case. Warren Buffett said the downgrade “doesn’t make sense,” that Treasuries are still AAA in Omaha, Nebraska, and that S&P should rate U.S. debt AAAA. If AA+ means very low credit risk and AAA means no credit risk, I guess AAAA would signify negative credit risk.