US in possible downgrade encore shock

"Eurozone crisis-ed out? Here is a refreshingly simple distraction: US sovereign ratings!

The “not-so-super” Deficit Commission is very unlikely to come up with a credible deficit reduction plan. The committee is more divided than the overall Congress. Since the fall back plan is sharp cuts in discretionary spending, the whole point of the Committee is to put taxes and entitlements on the table. However, all the Republican members have signed the Norquist “no taxes” pledge and with taxes off the table it is hard to imagine the liberal Democrats on the Committee agreeing to significant entitlement cuts. The credit rating agencies have strongly suggested that further rating cuts are likely if Congress does not come up with a credible long-run plan. Hence we expect at least one credit downgrade in late November or early December when we expect the super Committee crashes.

That’s from BofAML’s US economist Ethan Harris and team. It comes in the context of explaining why their US forecasts (which now see 2.5 per cent growth in H2/2011, and 1 per cent growth for 2012) are rather different to the herd:..."

at http://ftalphaville.ft.com/blog/2011/10/24/709551/us-in-possible-downgrade-encore-shock/