Video: S&P lowers outlook on US debt for first time

  1. Closed captioning of: S&P lowers outlook on US debt for first time

    >> street an the news that sent stocks plummeting to their lowest levels in a month. the dow closed down 140 after standard & poors downgraded the outlook on the nation's debt from stable to negative. what does that mean? erin burnett is here to explain. good morning. what's the immediate impact of that?

    >> the immediate impact is basically nothing. but that doesn't mean it doesn't matter. it does. what standard & poors is doing is putting words to something people have known for a long time. the situation in this country with entitlements is a big issue or they will downgrade. this is the warning before the downgrade.

    >> it says the u.s. or the government risks losing the aaa credit rating in the next two years if the debt issue isn't resolved. the chances of that are one in three. what would the impact then be to the average american ? do you believe the odds?

    >> the impact is significant. if they cut the actual rating, what that means is the u.s. is a riskier credit. it will cost more to borrow. if it costs us more, not only do we pay more in interest but your credit card rates, mortgage rates and other rates will go up as well. it does affect everybody.

    >> wall street didn't like it. stocks were down on monday. the u.s. treasury said, we believe s & p's outlook under estimates the ability of america's leaders to address the difficult fiscal challenges facing the nation. if you look at what we went through with the budget crisis and the almost shut-down of the government, both sides -- democrats and republicans -- dug in their positions on the debt ceiling and future budgets. is the s & p wrong?

    >> the treasury was too optimistic. the proof is in the pudding . at the left and right democrats and republicans haven't been willing to work together. the s & p is worried we won't get a deal before the election. it's important to distinguish that the s & p is assuming we raise the debt ceiling. it's seen as a must-do. if you default on debt it has huge repercussions and means people may not get social security checks as well.

    >> is this a delicate line for folks at the s & p? are they venturing into politics when they should be sticking to fiscal policy ?

    >> they are a little bit. i would say this, matt. i wish we could have an objective third party come in and help with the debate. the fight now is do we cut spending or raise taxes or do a combination of the two? that's where the parties don't seem to agree. if we could get a third party with an opinion on, well, if we do this and that we'll get a solution. it may help the american people . it takes some of the politics out. i hope this is a good thing.

    >> erin burnett , nice to see you. thank you very much.

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