WASHINGTON — An unexpected warning by a major credit agency on the United States’ soaring debt shocked global investors and threatened still wider consequences for the U.S. economy, even as a new sense of realism emerged in the stalemate between President Barack Obama and congressional Republicans over fiscal policy.
The warning, a shot across the government’s bow, came in the form of a downgrade by an independent credit agency in its assessment of the deficit problem. Standard & Poor’s said Monday there was a one-in-three chance that it would lower the Treasury Department’s now-sterling AAA credit rating on U.S. debt in the next two years.
The forecast alone could drive interest rates higher and impose new strains on consumers and the still- fragile economic recovery.
The White House dismissed the rating agency’s move as a “political” gesture that failed to recognize America’s long history of political opponents coming together in times of crisis. And, after weeks of often-bellicose sparring, there were signs that just such an edging together might be underway — at least on the most immediate issue of raising the debt ceiling.
Until a few days ago, some prominent conservative Republicans — including some House members — had been questioning whether it was necessary to raise the debt ceiling.
In recent days, however, Obama and GOP congressional leaders issued pledges to get the ceiling raised in a timely fashion. Obama acknowledged that an agreement would entail new commitments on deficit reduction, and Republicans promised to find common ground even though they still have huge differences with Democrats on spending and taxes.
“This debate has moved into a different realm,” said R. Bruce Josten, chief lobbyist for the U.S. Chamber of Commerce.
The chamber and other business groups have been working hard to persuade Republicans not to hold up debt-ceiling legislation.
The national debt will hit its legal limit of $14.3 trillion in a matter of weeks.
The surprising action by S&P, coming on a day when markets were fretting over Europe’s debt woes, clearly unnerved investors, many of whom have long regarded the spiraling U.S. debt as a problem for the future, not the present.
