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#5: S&P Outlook Downgrade

In April, ratings agency Standard & Poor’s downgraded its outlook on the U.S. debt to negative from stable. Then in August, the agency cut its long-term credit rating for the first time in the history, lowering it one notch from AAA rating to AA-plus. In a statement accompanying the downgrade, S&P said, “We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process.”

Translation: The lack of political will in Washington to address the nation’s fiscal problems is the reason for the downgrade.

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