On Friday, Standard & Poor's downgraded the U.S. credit rating for the first time in history, which could provide a new panel created under the recent debt deal with extra incentive to cut entitlement programs, the New York Times reports (Pear, New York Times, 8/7).
Background
Under the budget agreement, House and Senate leaders will establish a 12-member bipartisan, bicameral panel to develop and pass by the end of November a package of $1.5 trillion in additional federal spending cuts over 10 years.
Failure by Congress to enact further spending reductions at the end of this year would trigger a series of automatic cuts of as much as $1.2 trillion. If the triggers are engaged, Medicaid is exempted and Medicare is protected from deep spending cuts. However, the deficit panel is not bound by those stipulations (California Healthline, 8/5).
S&P Report
S&P in its report reclassified the U.S. credit rating from AAA to AA-plus, despite the recent budget agreement (CQ Today, 8/5).
S&P cited the contentious debate leading up the deal, as well as ongoing partisan conflict, when explaining the downgrade, saying the new panel likely will be subject to another "contentious and fitful process" (McKinnon et al., Wall Street Journal, 8/6).
he report noted that, although the panel is charged with cutting $1.5 trillion, S&P hopes to see $4 trillion in total deficit reduction. The report also stated that cutting entitlement programs is "key to long-term fiscal sustainability," adding that the debt deal "envisions only minor policy changes on Medicare" (New York Times, 8/7).
Reaction
William Hoagland, a former GOP budget aide, said he thinks the credit downgrade "is going to bring the [panel] leaders to a little bit of a come-to-Jesus moment where they say, 'Wait a minute -- we've got to make these things work." He noted, "Most people will say they expected this committee to go to loggerheads and nothing will come out of it, but I believe that this will put pressure on the leaders to rethink who they appoint … in a way that they might be willing to work in the center of the political spectrum."
Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget, said the downgrade "actually may switch the agenda of the [panel] from just standing by … to really (pushing) this whole 'go big' movement to the top of the agenda" (Wall Street Journal, 8/6).
Rep. Joe Courtney (D-Conn.) said the panel could "surprise a lot of skeptics" by agreeing on a deficit-reduction package, which would disprove S&P's criticisms.
Ryan Skeptical of Panel
House Budget Committee Chair Paul Ryan (R-Wis.) during an interview on "Fox News Sunday" said he does not expect the panel to "achieve a full fix to our problems because Democrats have never wanted to put their health care bill on the table" for cuts (New York Times, 8/7).
He said, "I'm not putting my stock in this committee," adding, "I think people are overemphasizing what this committee is going to achieve." However, he said that he would serve on the committee if asked and that he thinks the panel could overhaul the U.S. tax system (Lorber, CQ Today, 8/7).