S&P Executive Cites Obama's Characterization of U.S. Political System as 'Dysfunctional’

August 8, 2011 - 8:27 AM

Cash, money, dollars

New $20 currency notes roll off the presses at the Bureau of Engraving and Printing in Washington. (AP File Photo/J. Scott Applewhite)

(CNSNews.com) - John Chambers, managing director of Standard & Poor’s, says politics played a part in S&P’s decision to lower the nation’s credit rating for the first time in U.S. history.

“Although the political settings in the United States are still strong, they are not as strong as we had thought previously compared to some other highly rated governments,” Chambers told Fox & Friends on Monday.

“There really is, well, as President Obama -- who characterized the political system as ‘dysfunctional’ -- I think that’s a good word. We got to a position where we were within ten hours of having a major cash flow problem. This is not what happens in other countries.”

As for Democrats’ accusations that the tea party bears responsibility for the downgrade, Chambers said there is “lots of blame to go around.”

He said the U.S. needs to find a way of “forging consensus, so that we can make the tough choices that lie ahead, because the fiscal situation in the United States is not sustainable.”

Chambers said the U.S. needs a “medium-term fiscal consolidation plan…and for that you need policy makers who can take a pro-active stance to put public finances on a sustainable footing.”

Asked if S&P would have downgraded U.S. credit rating if Congress had passed legislation requiring a balanced budget amendment, Chambers said “I think that what you would need is to have confidence” that such an amendment would “bind,” meaning that it would actually work.

Chambers said in addition to “politics,” the second factor influencing the U.S. credit-rating downgrade was the U.S. fiscal trajectory -- including the fact that debt-to-GDP ratio has doubled in recent years.

"If the United States can get its deficit down, and in doing so, assuming the economy grows and the debt to GDP comes down, that would be positive for the credit standing of the United States.”

As CNSNews.com reported in March, the Congressional Budget Office said that President Barack Obama’s 2012 budget would cause large and persistent yearly deficits, pushing the public debt to $20.8 trillion by 2021.

“Federal debt held by the public would double under the President’s budget, growing from $10.4 trillion (69 percent of GDP) at the end of 2011 to $20.8 trillion (87 percent of GDP) at the end of 2021,” the CBO said in its March 18 analysis of Obama’s 2012 budget.

Debt was 40 percent of GDP at the end of 2008, just before Obama took office.