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S&P boosts outlook for long-term federal debt

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By The Associated Press
Tuesday, June 11, 2013, 12:01 a.m.
 

WASHINGTON — Standard & Poor's Ratings Services upgraded its outlook on Monday for America's long-term debt. S&P cited the government's strengthened finances, a recovering economy and some easing of Washington's political gridlock.

The credit rating service raised its outlook to “stable” from “negative,” which means it's less likely to downgrade debt in the near future.

S&P reaffirmed the government's “AA+” long-term and “A-1+” short-term unsolicited sovereign credit ratings. The long-term rating remains a notch below S&P's top grade.

S&P downgraded the government's long-term credit rating in 2011 after a standoff in Congress over whether to raise America's borrowing limit.

Stan Collender, a budget expert with the Qorvis Communications consultancy, downplayed the significance of the move. S&P's downgrade two years ago had no lasting effect on interest rates, the stock market or the value of the dollar. Long-term federal interest rates remain historically low — evidence that global investors remain confident in the government's creditworthiness.

Mary Miller, undersecretary for domestic finance at the Treasury Department, said, “We're pleased that they (S&P officials) are recognizing the progress in the U.S. economy and fiscal results.”

Asked whether she was concerned that this action could remove pressure on Congress to take further action on the budget deficit and increase the debt ceiling later this year, Miller said, “I haven't given that any thought, but obviously we would like to see progress on things like the U.S. debt ceiling.”

Treasury is taking various actions to provide headroom under the debt ceiling but it is expected to exhaust those maneuvers sometime this fall.

Miller said that Treasury officials met recently with S&P to discuss the improved deficit outlook but that the ratings agency had not given the administration a heads up that a ratings upgrade was imminent.

The rating agency noted approvingly on Monday that Congress agreed to raise some taxes this year, notably the Social Security tax that most workers pay.

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