The bad news: Standard & Poor’s cut its long-term credit rating on U.S. Treasury’s debt to AA+ with a negative outlook late Friday, the first U.S. credit downgrade in history.
The good news: given S&P’s inability to make the right call on the U.S. credit crisis, and its high-stakes arithmetical error, the downgrade may not have its intended effect.
In what the Wall Street Journal’s Damian Paletta called a “wild back and forth” that played out Friday afternoon, the U.S. Treasury Department discovered that S&P miscalculated future U.S. deficit projections by nearly $2 trillion in its downgrade. S&P admitted to the bad math after affirming the downgrade Friday afternoon. But Treasury’s math discovery — and the budget deal brokered by legislators earlier in the week — were not enough to stave off the downgrade, which marks the first time that one of the three main ratings firms stripped the U.S. of it top rating. The U.S. had a AAA rating for 70 years. . .