Wall Street sounds alarm on U.S. government
With Congress far apart in the debate over how and how much to cut the deficit, a top rating firm fired a warning shot over Washington Monday, reports CBS News correspondent Anthony Mason.
Standard & Poor's lowered the outlook for U.S. credit to "negative," citing "a significant risk that Congressional negotiations could result in no agreement."
"If we think the efforts of Congress and the administration fall short, then the rating will fall," said David Beers with Standard & Poor's. "That is the message we are sending out today."
Standard & Poor's continues to rate U.S. credit AAA, one of only 17 nations with the highest rating. But the U.S. is now the only AAA nation with a "negative" outlook.
Wall Street reacted quickly to the ratings warning. The Dow tumbled 140 points.
Stocks sink after S&P issues warning on U.S. debt
White House spokesman Jay Carney said Standard & Poor's assessment was overly pessimistic.
"We think it's a reminder that it is important that we reach agreement on fiscal reform, is always valuable. And that's essentially what it is," Carney said. "We simply believe that the prospects are better."
Breaking down the budget brawls
But S&P says the U.S. faced a significant risk of a ratings downgrade.
The S&P's Negative Outlook for U.S. Debt
"We think there is at least a 1 in 3 chance that the rating will decline," Beers said.
With the U.S. debt now at $14.2 trillion and rising -- the consequences could be expensive.
"What that means is that going forward that U.S. borrowing costs are a little bit higher and that trickles through the U.S. economy and increases the costs for everybody," said Dan Greenhaus, the chief economic strategist with Miller Tabak.
For example, with its AAA rating, it costs the U.S. 6.5 cents to borrow one dollar for two years. But Greece, with a BB rating, has to pay 20 cents for every dollar it borrows. And borrowing costs for the government affect borrowing costs for consumers.
U.S. debt is still viewed as one of the safest investments in the world. But this is the first time ever U.S. credit has been tagged with a negative outlook.
