Newswise — “S&P has not said anything that U.S. policymakers haven’t heard in the recent past.
“It is no secret that the U.S. economy is under significant strain. However, unlike debtor countries in the developing world in particular, the U.S. is not accustomed to having its finances externally judged. The international status of the U.S. dollar as a major reserve currency and the central position of the U.S. in the post-World War II era have offered a bulwark of sorts against the same degree of monitoring. As the economic and political balance of power shifts in the coming decades it is likely that we’ll move to a more even financial playing field on this front.
“This does not change what needs to be done in either the short or long run. In the short run the debt ceiling needs to be raised to give the economy some breathing space – though perhaps the S&P statement will encourage Congress to move more quickly. In the long run, the same judgments still need to be made on how best to re-establish a healthy economy going forward. All the same policy debates continue to exist.
“I would just caution against making any precipitous changes – for example slashing spending in such a way that undermines demand and dampens the economy. Debtor countries in previous crises have made the mistake of adopting overly stringent policies – sometimes under external pressure – that turned out not to strengthen their economies.” --Odette Lienau, an expert on international economic relations and an assistant professor of Law at Cornell University
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