Stephen Foley: Debt plans seem too vague to save rating

 

US Outlook: Barack Obama's rhetorical gifts used to be channelled to soaring optimism. Two years in Washington and he can manage only pithy cynicism. The US may lose its triple-A credit rating, he says, "because we lack a triple-A political system".

I hope this president breaks with etiquette and fashions his post-White House life not as a roving ambassador or philanthropist, but as an advocate for constitutional reform. Whether that post-White House life begins in 2013 or 2017, the events of the coming few days may well decide.

At the time of writing last night, there was still no clear route to a political deal that will raise the debt ceiling and allow the US government to pay the bills that its Congress has racked up, and while financial markets are less sanguine than they were at the start of the week, few traders have positioned themselves to bet on a default. This is not quite a "Lehman weekend", like the one in 2008 where financial markets hinged on the success or failure of talks on rescuring Lehman Brothers. But if we wake up Monday without progress, the day will be rocky.

It is worth reminding ourselves what the credit rating agencies have said about the US credit rating. These are the rules against which the political outcome will be measured. Standard & Poor's said it will strip the US of its triple-A rating "if we conclude that Congress and the Administration have not achieved a credible solution to the rising government debt burden and are not likely to achieve one in the foreseeable future... We may also lower the long-term rating if we conclude that future adjustments to the debt ceiling are likely to be the subject of political manoeuvring to the extent that questions persist about Congress's and the Administration's willingness and ability to timely honour the US's debt obligations."

The one thing that all the competing deficit reduction plans have in common (apart from their inability to garner enough to support to pass a Republican House, a Democratic Senate and a president threatening a veto) is that hundreds of billions of dollars of detail remains to be sketched. Budget cutting targets are not the same as specific cuts, as S&P well knows. Worse, one of the most likely outcomes appears to be a short-term extention to the debt ceiling and a cross-party commission on future cuts and tax rises, charged with reaching a deal in the hothouse atmosphere even nearer next year's election.

That cannot and should not satisfy S&P's criteria.

Citigroup yesterday put the likelihood of a US debt downgrade at 98 per cent, and I struggle to see where it gets the other 2 per cent from. That's the intention of Mr Obama's rhetorical flourish yesterday. When the triple-A rating is lost, it is to the political system that he hopes to pin the blame.

Start your day with The Independent, sign up for daily news emails
New Articles
tvDownton Abbey Christmas special
Arts and Entertainment
Wolf (Nathan McMullen), Ian (Dan Starky), The Doctor (Peter Capaldi), Clara (Jenna Coleman), Santa Claus (Nick Frost) in the Doctor Who Christmas Special (BBC/Photographer: David Venni)
tvOur review of the Doctor Who Christmas Special
News
peopleIt seems you can't silence Katie Hopkins, even on Christmas Day...
News
news
PROMOTED VIDEO
News
i100
Arts and Entertainment
Left to right: Stanley Tucci, Sophie Grabol and Christopher Eccleston in ‘Fortitude’
tvSo Sky Atlantic arrived in Iceland to film their new and supposedly snow-bound series 'Fortitude'...
Arts and Entertainment
Jenna Coleman as Clara Oswald in the Doctor Who Christmas special
tvForget the rumours that Clara Oswald would be quitting the Tardis
Arts and Entertainment
Japanese artist Megumi Igarashi showing a small mascot shaped like a vagina
art
News
The Queen delivers her Christmas message
newsTwitter reacts to Her Majesty's Christmas Message
Arts and Entertainment
tv
Life and Style
fashion
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

Day In a Page

A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all