If you cry ‘wolf’ too often, you won’t be believed when the wolf appears. If you don’t cry ‘wolf’ when the wolf appears, you won’t be believed when another shows up. This is the dilema that S&P finds itself in after saying it has turned ‘negative’ on US debt.The S&P did not downgrade US debt from its AAA rating, nor will it anytime soon. S&P, it turns out, was negative because it fears that Congressional gridlock will block any meaningful reduction in the US deficit. (As if everyone and their mother didn’t fear the same thing!) Ok, fair enough.
But, let’s at least get the facts straight:
Republicans reacting to the announcement by Standard & Poor’s that it might downgrade the U.S. government’s triple-A bond rating got it backwards: the rating agency’s concern isn’t primarily about deficits and debt but the political gridlock that may prevent doing anything about them.