page_title: United States debt-ceiling crisis of 2011
section_title: US reaction
hierarchical_section_title: United States debt-ceiling crisis of 2011 / Reaction / US reaction
caption_attribution_description: English: Countries by Standard &amp; Poor's Foreign Rating
context_page_description: The United States debt-ceiling crisis of 2011 was a stage in the ongoing political debate in the United States Congress about the appropriate level of government spending and its effect on the national debt and deficit. The debate centered around the raising of the debt ceiling, which is normally raised without debate. The crisis led to the passage of the Budget Control Act of 2011.
  The Republican Party, which had retaken the House of Representatives the prior year, demanded that President Obama negotiate over deficit reduction in exchange for an increase in the debt ceiling, the statutory maximum of money the Treasury is allowed to borrow. The debt ceiling had routinely been raised in the past without partisan debate and without any additional terms or conditions. This reflects the fact that the debt ceiling does not prescribe the amount of spending, but only ensures that the government can pay for the spending to which it has already committed itself. Some use the analogy of an individual "paying their bills".
context_section_description: The national debt rose $238 billion (or about 60% of the new debt ceiling) on August 3, the largest one-day increase in the history of the United States. The US debt surpassed 100 percent of gross domestic product for the first time since World War II. According to the International Monetary Fund, the US joined a group of countries whose public debt exceeds their GDP. The group includes Japan (229 percent), Greece (152 percent), Jamaica (137 percent), Lebanon (134 percent), Italy (120 percent), Ireland (114 percent), and Iceland (103 percent).
  The NASDAQ, ASX, and S&P 100 lost up to four percent in value, the largest drop since July 2009, during the global financial crisis that was precipitated in part by the United States housing bubble and the corresponding losses by holders of mortgages and mortgage-backed securities. The commodities market also took losses, with average spot crude oil prices falling below $US86 a barrel. The price of gold fell, as deepening losses on Wall Street prompted investors to sell.
  On August 5, 2011, Standard & Poor's credit rating agency downgraded the long-term credit rating of the United States government for the first time in its history, from AAA to AA+. In contrast with previous ratings, the agency assumed in the base case scenario that the tax cuts of 2001 and 2003 would not expire at the end of 2012, citing Congressional resistance to revenue raising measures. The downside scenario, the conditions that would likely lead to a further downgrade to AA, assumed that the second round of spending cuts would fail to occur and that yield on Treasury bonds would increase but the dollar would remain the key global reserve currency. The upside scenario, consistent with maintaining the new AA+ rating, included the expiration of the 2001 and 2003 tax cuts and only modest growth in government debt as a percentage of GDP over the coming decade. A week later, S&P senior director Joydeep Mukherji said that one factor was that numerous American politicians expressed skepticism about the serious consequences of a default—an attitude that he said was "not common" among countries with a AAA rating. At the end of 2012, the United States fiscal cliff was resolved in a compromise without expiring the 2001 and 2003 tax cuts, but S&P did not downgrade to AA.  The other two major credit rating agencies, Moody's and Fitch, continued to rate the federal government's bonds as AAA.
  In a joint press release on the same day from the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency, federally regulated institutions were told that for risk-based capital purposes, the debt of the United States was still considered to be risk free.
caption: Countries by Standard & Poor's Foreign Rating           AAA AA A BBB BB B CCC CC/D
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