Reading On The U.S. Debt Downgrade

S&P has downgraded U.S. debt from AAA to AA+. But what does that mean?

Dylan Matthews presents arguments both for why it might matter, and why it won’t. Tyler Cowen shares some quick thoughts (written before the actual downgrade was announced).

My initial thinking is that the AA+ rating should not have a huge impact. The debt situation was not exactly unknown, and very little new knowledge has sipped out. But to my mind the debt crisis really is a crisis, although that was just as true a year ago as it is today. I’ll reiterate that spending needs to be genuinely cut. Probably, revenues must be raised too, preferably by broadening the tax base. Perhaps a gas tax should be considered as well.

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