Standard & Poor’s bombshell

A mute, almost disbelieving response (except on the Markets) has met Standard & Poor’s announcement that the US government’s fiscal profile may become ‘measurably weaker’. The credit rating agency has put a ‘negative outlook’ on the US’s AAA rating; the accompanying report said:   

“We believe there is a material risk that U.S. policy makers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013. If an agreement is not reached and meaningful implementation does not begin by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer ‘AAA’ sovereigns.”

Robert Peston tweets, “S&P’s announcement that outlook is negative for USA’s AAA credit rating may in one sense be statement of obvious – but is shocking.” It’s hard to disagree with that, given the scale of the political and economic task facing American policy makers.

PS: Benedict Brogan writes