Both the White House and Congress have seized on Standard and Poor’s revised US credit outlook as ammunition in their row over how to reduce the US deficit.
After the influential agency changed its outlook from stable to negative and threatened to reduce the US’s AAA rating, both sides lashed out at each other’s solutions.
Democrats and Republicans are a long way from agreeing a deal.
Financial chief Mohamed el-Erian said the US was in a grave situation:
“I think that there are messages going to Washington from all quarters that this is a serious issue and that no one can escape the implication of a further deterioration in the US fiscal situation. And it’s not just about the US. It’s also about the global economy. The US is at the core of the global economy.”
US stocks tumbled after the financial warning – The US federal deficit currently stands at $1.4 trillion dollars and is expected to reach $1.5 trillion in the current fiscal year.
President Obama and the Republicans are locked in battle over the extent of spending cuts needed to put America’s house in order.