U.S. credit rating downgrade ‘inevitable’

Story from The Takeaway. Listn to audio above for full report.

After party leaders in Congress spent Monday lobbying skeptical members from both sides of the aisle, the House passed a bill to raise the federal debt ceiling by a vote of 269-161. Many Democrats joined Tea Party Republicans, their ideological opposites, in voting against the bill. The Senate is expected to vote on the legislation this afternoon.

The debt ceiling deal might satisfy those rating agencies that warned of a possible downgrade of the United States’ credit rating if the the parties did not end the political stalemate. But does the deal reassure agencies worried about the fundamental weaknesses of the U.S. economy?

Gillian Tett, a managing editor of the Financial Times, says a downgrade is inevitable. “The key one to watch right now is the ratings agency Standard & Poor’s, which has warned repeatedly in recent weeks that it would like to see about $4 trillion worth of cuts,” she said. “If not, it said that in the next three months it may well cut the AAA rating.”

According to Tett, companies are starting to look like a better bet than governments as an investment option. “Moody’s for example came out last week with a very interesting statement saying even if the U.S. government saw its AAA rating downgraded, it would leave the best four companies still on AAA — companies like Apple.”

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“The Takeaway” is a national morning news program, delivering the news and analysis you need to catch up, start your day, and prepare for what’s ahead. The show is a co-production of WNYC and PRI, in editorial collaboration with the BBC, The New York Times Radio, and WGBH.