MIAMI (CBS4)- Top officials at Standard & Poor’s are not backing down from their decision to downgrade the U.S government’s credit rating, and that decision has South Floridians, including financial analysts, watching closely.
The credit rating agency announced that it is cutting the country’s top AAA rating by one notch to AA-plus. The credit agency said late Friday that it is making the move because the deficit reduction plan passed by Congress on Tuesday did not go far enough to stabilize the country’s debt situation and that the policymaking is not stable or effective as needed to address the current economic challenge.
It’s similar to your credit rating and when the score dips the price of living goes up, CBS4 Tiffani Helberg reported.
The decision was a historic move. America’s gold-plated credit rating took a hit after nearly a century of perfect credit.
“It’s the first time in the United States history that our credit rating, the nation’s credit rating, has been lowered,” said South Florida financial analyst Jack Howell said.
It’s something financial analysts, including Howell, are watching very closely. Howell founded the American Institute for Financial Education.
“It is a big deal and we are really in unchartered waters,” Howell said.
The White House said the talks that led to this week’s deal on hiking the borrowing limit “took too long” and were “at times too divisive.”
President Barack Obama predicted the move would inflict pain across the board.
“A lower credit rating would result potentially in a tax increase on everyone in the form of higher interest rates on their mortgages, their car loans and their credit cards,” he said.
That’s bad news to South Floridians trying to pull through in an already difficult economy.
“I have a car loan which if my interest rate goes up is going to make me take money away from other things that I might be spending it on,” South Floridian John Quimby said.
The news has some thinking proactively about their savings.
“That means, you know, less time to go out to spend money,” Marco Espinoza said. “(I have to) just be more conservative about saving my money, you know.”
Some say the stock market saw this coming since this past week was its worst week since the 2008 financial crisis.
“Some investors have been leaving the stock market and have been shifting their capital into quote, unquote safe havens which are generally U.S. treasury bonds,” Howell said.
Howell added that, “individual investors should be aware that we are in turbulent times and probably will be in these times for some time to come in the future.”
S&P is also issuing the U.S. a negative outlook, which basically means if Washington cannot prove itself fiscally responsible another downgrade could be on its way.