Video: S&P downgrades US credit for first time ever

  1. Closed captioning of: S&P downgrades US credit for first time ever

    >>> to the newest blow for the u.s. economy , because for the first time ever the country has lost its triple-a credit rating . standard & poor 's says it decided to take the u.s. down a notch after the long drawn out debt fight in washington . cnbc chief washington correspondent john harwood is live for us again this morning. with another good morning to you, john. wasn't this big debt deal supposed to help the u.s. avoid these financial problems? we kept on talking about the possibility of downgrading. when they put this deal together, that was not supposed to happen.

    >> we did think that it was going to avoid a downgrade. look, standard & poor 's had said earlier in the year that they needed to see a $4 trillion deal. i think everyone involved in washington was counting on the fact that they would ultimately look at the deal that was passed, even though it fell short of that and say, yeah, the u.s. political process is messy and dysfunctional, but ultimately they get moving in the right direction. they'll keep moving in the right direction. the supreme court said no. not only did you not provide the level of deal that we needed, but you put on display the bitter divisions, the republicans resisting tax increases. we need entitlement cuts as well. all those things that didn't materialize in a big way, and the u.s. is going to pay the price for that through this downgrade.

    >> okay. tell me how the u.s. pays the price for it? how about put it into you and me to our pocketbooks. i mean, should you or i go for car loans , home loans, how is it going to affect us?

    >> well, i should have said, alex, we don't know for sure that we're going to pay a big price. in fact, the administration is hoping that we won't, but if we did, it would be because investors would be more reluctant to lented e lend to the united states at interest rates as low as they've been paying. they would say if we're going to lend you money, we need more in interest. that would, in turn, raise your and my mortgages payments, our auto pams, all of the interest rates that we pay. the administration is hoping that investors already know about u.s. treasuries , that they're equivalent to cash, that it is not going to given the difficulties in other economies around the world, people are still going to want to invest here. they're not going to demand higher interest rates . we're just going to have to see how investors and how the financial markets reacted.

    >> yeah. can i just ask you how the white house is pushing back on what they're alleging that the whole s&p financial figuring, they're adding up of numbers does not add up properly?

    >> when the treasury department got standard & poor 's notice of an intent to downgrade and their reasoning, their career officials looked at the computations and said, wait a minute, you're off by $2 trillion in your assessment of what we're going to spend on discretionary programs. that had to do with a bunch of complicated accounting, but ultimately it came down to the treasury saying we're not going to spend as much under this deal as you think we are. standard & poor 's acknowledged that. what they said was that in the broadest sense, they were looking at the dysfunction in our political system and making a judgment about our ability to take the next step that is need to be taken to get our debt problems under control and they found those lacking.

    >> okay. john harwood , a perfect position at the white house

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