U.S. President Barack Obama leaves after delivering remarks at the White House in Washington on August 8, 2011. UPI/Yuri Gripas. | License Photo
WASHINGTON, Aug. 8 (UPI) -- Standard & Poor's Monday defended its decision to lower the U.S. credit rating and blamed the vitriol in Washington in part for the downgrade.
David Beers, S&P's managing director of sovereign ratings, told CNN the United States must follow the agreement reached last week to the letter if it hopes to avert a further downgrade.
S&P Friday reduced the U.S. credit rating from AAA -- the highest -- to AA+.
In a White House statement, President Barack Obama urged Congress to put partisan bickering aside and reach an agreement on solving the U.S. debt crisis. He said the downgrading gives a new sense of urgency to the issue.
"We knew from the outset that a prolonged debate over the debt ceiling, a debate where the threat of default was used as a bargaining chip, could do enormous damage to our economy and the world's," Obama said.
"That threat, coming after a string of economic disruptions in Europe, Japan and the Middle East, has now roiled the markets and dampened consumer confidence and slowed the pace of recovery.
Asked whether S&P had any regrets about its actions, Beers responded, "Absolutely not."
"This idea that we made a $2 trillion error is simply a smoke screen for the unhappiness, in our view, about our decision, because the issues that the Treasury was talking about are ... about projections far into the future," Beers said on ABC's "Good Morning America.
"For example, the way we measure the overall indebtedness of the United States, you know, federal, state and local governments, excluding assets, this year, the -- that indebtedness should be around $11 trillion. We expect by 2015 it will be about $14.5 trillion. And we expect that by 2021, it should exceed $20 trillion. These are very large numbers, right?
"The difference between the original projections we discussed with the Treasury and our final projections going out to 2015, which is kind of the time horizon that we usually focus around ratings is about $200 billion or $300 billion. You know, the difference between $14.5 trillion and $14.7 trillion, and anybody who's in the business of ... financial projections, will look at this and shrug their shoulders."
John Chambers, managing director and chairman of S&P's Sovereign Rating Committee, acknowledge the recession and the actions the government took to keep the situation from devolving into a depression were largely responsible for the debt crisis -- especially since Washington chose not to build up any kind of cushion during good economic times. He noted five other countries -- Australia, Canada, Denmark, Sweden and Finland -- had their debt ratings lowered to AA+ and were able to regain their AAA ratings within 18 months.
Mark Zandi, chief economist of Moody's Analytics, told CNN the debt problem needs to be resolved if the economy is ever to get back on track.
"I mean, without a good fiscal situation, we're not going to have a good economy, have a business create enough jobs. So that's a necessary condition and there is no magic bullet here," Zandi said. "We've tried a lot of different things. It's going to take time. But there are things we can do and I think policymakers will step up and do them if the job market doesn't kick in to a more significant degree in the next few months."