Publications

- September 2011: Vol. 23 No. 8

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A Casualty of Hope: Better Days Are Ahead … But No One Knows When

by Geoffrey Dohrmann

At the 11th hour, Congress managed to pass a provision for raising the ceiling on the national debt. While the result was a compromise that will enable the U.S. government to continue to function, the process highlighted just how dysfunctional the U.S. political system has become.

Raising the debt ceiling, of course, was only a temporary measure and did not stave off the downgrading of American government debt. Even though a deal was eventually reached, ratings agency Standard & Poor’s downgraded U.S. debt from AAA to AA+, noting, “The downgrade reflects our view that the effectiveness, stability and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges.”

A downgraded debt rating for U.S. government bonds will increase global competition between sovereign credit instrument issuers and place u

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