S&P says shrinking U.S. deficit boosts debt outlook

Tim Mullaney

USA TODAY

Standard , Poor's Ratings Services upgraded the U.S. government's debt outlook from "Negative" to "Stable." The U.S. Treasury Department is pictured in 2011 after S,P cut the U.S. credit rating for the first time in history.

The U.S.%27s long-term credit rating was lowered in 2011 after Congress battled over the debt limit.
Ratings agency says all U.S. government debt will stabilize around 84%25 of GDP
S%26P says D.C. partisanship %22not getting worse%2C%27%27 says U.S. can defer fixing entitlements

NEW YORK — Standard & Poor's boosted its outlook for U.S. government debt Monday, citing stable government debt levels and predicting the U.S. economy will continue to improve.

The credit rating service affirmed the U.S. government's "AA+" long-term and "A-1+" short-term unsolicited sovereign credit ratings. It revised the outlook for Treasuries to "stable'' from "negative,'' meaning S&P is less likely to downgrade U.S. bonds soon.

S&P's rating on the government's long-term bonds is a notch below the firm's top AAA rating, which the U.S. lost in 2011.

Monday's announcement came after the Congressional Budget Office projected the U.S. deficit will shrink to $642 billion this year, from over $1 trillion the past four years. S&P raised its outlook even though Congress hasn't passed the kind of medium-term deficit reduction package S&P and other ratings firms have said is needed to cope with the growth of Social Security, Medicare and other entitlement spending.

``We think the U.S. has until near the end of the current decade to address that issue,'' said Nikola Swann, S&P's director of sovereign bond ratings. ``Recent growth has given us time to address this.''

President Obama's proposal to change the inflation index used to calculate cost-of-living adjustments for Social Security would be a major step toward putting the government's largest entitlement program on a more solid footing, said John Chambers, chairman of S&P's sovereign debt rating committee.

"It would put us on a more sustainable path,'' Chambers said.

S&P downgraded the U.S. government's long-term credit rating in 2011 after a battle in Congress over whether to raise America's borrowing limit.

The ratings service observed Monday that Congress managed to broker a deal late last year that allowed certain tax cuts to expire and cut spending. Meanwhile, S&P says the economy has started to improve and is expected to continue to do so.

Contributing: Associated Press

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