Va., Md. Could Be Downgraded Over Entitlement Cuts

View Comments (
)
|
Email
|
Print

    NEWSLETTERS

    TK
    AFP/Getty Images
    Standard & Poor's headquarters in the financial district of New York.

    Although it lowered the credit rating of the federal government, Standard & Poor's said it will not drop the ratings of Virginia and Maryland now, but the rating agency said that could change.

    S&P said it isn't going to tie state and local governments to the fate of the federal government, which no longer retains its sterling triple-A bond rating. But John Sugden, a director at the credit rating agency, said officials are now watching Congress.

    "To the extent that the federal spending cuts are so large that they affect the states' revenues, and to the extent that the states don't adjust their budgets to offset those reductions, there could be some pressure on the rating," Sugden said.

    As a part of the deal raising the federal debt ceiling, lawmakers set up a joint congressional committee tasked with finding at least $1.5 trillion in budget cuts. Sugden said the credit rating of states, such as Virginia and Maryland, will be reexamined based on the severity of those cuts. He said they're looking for a number of things.

    "One is direct reductions due to federal spending cuts, and that could be Medicaid it could be other sorts of spending that goes directly from the federal to the state," Sugden said.

    Another factor could be general economic weakness due to a slow recovery.

    The joint congressional committee has yet to be set up, but its findings are due by Thanksgiving.

    Listen to the complete story at wamu.org

    Copyright 2011 WAMU 88.5 - American University Radio. All Rights Reserved.