Standard & Poor’s was heavily criticized for its decision on Friday to downgrade for the first time in its history the credit rating of the debt of the United States. Politicians, and in particular Republicans, came under fire for having let the debt ceiling standoff go on for so long. And it was unlikely that the downgrade would do anything. Those were in general the reactions bloggers had to the news of the S&P downgrade.
New York Times blogger and Nobel prize-winning economist Paul Krugman said that given S&P’s poor record with mortgage bonds it had little credibility when it came to rating the credit quality of U.S. debt. What’s more, Krugman said S&P’s math behind the downgrade made little sense. S&P said that the deal to raise the borrowing ceiling should include $4 trillion in debt reduction. When it only included $2.4 trillion, S&P used that as justification for why the ratings agency was going through with the downgrade. But Krugman says this is all phony math. He says there is no justification for the $4 trillion figure and another trillion or so in cuts makes little difference when we are already over $14 trillion in debt. Krugman says,”In short, S&P is just making stuff up — and after the mortgage debacle, they really don’t have that right.” And Krugman wasn’t alone in teeing off on S&P.
