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S&P Cites Failure to Make Changes to Medicare in Downgrade Decision

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S&P Cites Failure to Make Changes to Medicare in Downgrade Decision

August 8, 2011

The rationale behind Friday’s Standard & Poor’s action that lowered the long-term credit rating to “AA+” may place additional pressure on reforms to the Medicaid, Medicare and other entitlement programs.


“We lowered our long-term rating on the U.S. because we believe that theprolonged controversy over raising the statutory debt ceiling and the relatedfiscal policy debate indicate that further near-term progress containing thegrowth in public spending, especially on entitlements, or on reaching anagreement on raising revenues is less likely than we previously assumed andwill remain a contentious and fitful process. We also believe that the fiscalconsolidation plan that Congress and the Administration agreed to this weekfalls short of the amount that we believe is necessary to stabilize thegeneral government debt burden by the middle of the decade….


“Republicans andDemocrats have only been able to agree to relatively modest savings ondiscretionary spending while delegating to the Select Committee decisions onmore comprehensive measures. It appears that for now, new revenues havedropped down on the menu of policy options. In addition, the plan envisionsonly minor policy changes on Medicare and little change in other entitlements,the containment of which we and most other independent observers regard as keyto long-term fiscal sustainability.”


See what else Standard & Poor's had to say about the decision here.