UNBELIEVABLE: S&P favours Reid Plan, Boehner Plan May Result In Losing AAA Status

harry reid

Photo: centre for American Progress via Flikr

Game-changer?According to CNN’s Erin Burnett, sources familiar with S&P’s thinking indicate that the Boehner plan — which attempts to raise the debt ceiling and make cuts in two separate steps — probably wouldn’t be enough to avert a downgrade from AAA.

On the other hand, the Reid plan, which does it all at once, would be looked on more favourably by the ratings agency.

Two quick thoughts on this development:

  • This makes the ratings agency look especially political, as it previously demanded $4 trillion in spending cuts — exactly what Obama wanted — as a precondition to preserving the AAA rating.
  • The AAA rating might be overrated, but up until now it’s been respected by politicians on both sides of the aisle being something worth preserving. That a two-step process wouldn’t preserve the rating is a huge strike against it.

All this being said, neither Reid nor Boehner is likely to pass in its current form (as Obama will say tonight) something that can pass both houses will need the all-at-onceness of Reid, with cuts that favour Boehner.

For more on tonight’s developments, watch here.

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