You may not have noticed, but Standard & Poor, the group that rates the creditworthiness of businesses and nations has adjusted its rating of the United States. I found this article on Marketwatch, a business site.
It doesn't seem to have bothered enough journalists to be rated as big news, but it is. Now, it's important to understand that the current credit rating didn't change. While that's good, what is bad news is that the creditworthiness outlook was lowered. S&P is saying that, for now, the US is a good credit risk, but that the outlook for the future is "negative." Because of our massive debt, and the low likelihood that our government is actually going to reduce and manage its borrowing, we have been downgraded from "stable."
If you don't think that is a big deal, think again. The federal government does not seem to think it should repay debt; it has borrowed money for decades. Both Republicans and Democrats have been guilty. Yes, I know Clinton supposedly ran surpluses- that isn't true, but this isn't the place for that discussion. The point is that as the debt mounts, so does the portion of tax income and borrowed money needed to pay that interest.
What the federal government does do, is pay interest on the debt. Right now, the Obama administration is planning their budget on interest rates at 3.2 percent And as the creditworthiness goes down, the interest rate goes up, just like you have with your own credit score. That is a very big deal indeed, because a lowered credit rating is what drove Greece, Portugal, and Ireland into the EU bailouts; they simply couldn't afford to borrow money at the high interest rates.
If we don't get our finances in order, who will run to the rescue and bail out the United States?
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