FWIW, the IMF has weighed in at the conclusion of its Article IV consultation with the U.S. The IMF declared:
Public Information Notice: IMF Executive Board Concludes 2011 Article IV Consultation with the United StatesDirectors agreed that placing public debt on a sustainable path is critical to the stability of the U.S. economy, with positive spillovers to other countries. They welcomed the administration’s objective to stabilize the debt ratio by mid-decade and gradually reduce it afterward. Directors highlighted the urgency of raising the federal debt ceiling and agreeing on the specifics of a comprehensive medium-term consolidation plan. With a well-defined, credible multi-year framework in place, the pace of deficit reduction in the short run could be more attuned to cyclical conditions.
Directors generally concurred that fiscal adjustment should start in FY2012 to guard against the risk of a disruptive loss in fiscal credibility. The strategy should include entitlement reforms, including additional savings in health care, as well as revenue increases, including by reducing tax expenditures. Directors welcomed the administration’s proposals for multi-year expenditure caps on non-security discretionary spending and a “failsafe” mechanism that would trigger automatic actions against deficit overruns.
The complete staff report can be found at: http://www.imf.org/external/pubs/ft/...11/cr11201.pdf (pp.13-19 deal with the U.S. fiscal situation).
Americans are so enamored of equality that they would rather be equal in slavery than unequal in freedom.
Alexis de Tocqueville
In Message #57 in this thread, I noted:
In my opinion, even when the debt ceiling is raised--and I still expect it to be done prior to August 2--the political dysfunctionality problem by itself suggests that the U.S. is not worthy of a AAA rating. Hence, I would not be surprised that at least one of the major Ratings organizations would lower the U.S. credit rating even if the debt ceiling is raised on a timely basis. After all given the political risk involved, confidence that the U.S. would make the decisions that need to be made, much less implement them, would be challenged to say the least.
Apparently, the political dysfunctionality issue was one of the criteria by which S&P determined that the U.S. no longer warranted an AAA rating. In part, S&P declared:
...the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.
Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics any time soon.
Standard & Poor's Downgrades US Credit Rating From AAA to AA+ - ABC News