April 18, 2011 / 3:53 PM / in 7 years

Neither party's deficit plan enough: S&P's Beers

NEW YORK (Reuters) - Neither President Barack Obama’s nor Congressional Republicans’ proposals would be enough to fix the government’s $1.5 trillion deficit, Standard & Poor’s global head of sovereign ratings David Beers said on Monday.

The tension between the White House and Congressman Paul Ryan and leading Republicans cast uncertainty over whether a credible deficit-reduction plan can be reached, Beers told Reuters Insider.

“Looking at the gulf between the parties, it has never been wider than now,” Beers said. “It takes a lot of political will to bridge this gulf.”

Earlier, the rating agency downgraded its credit outlook on the United States, raising the risk that the world’s biggest economy could lose its coveted AAA-rating in two years. S&P cited a risk that policymakers may not reach a deal on a plan to cut its deficit, eroding its long-term credit-worthiness.

A rating downgrade could dramatically raise the U.S. government’s borrowing cost.

S&P has downgraded the outlook of other major countries, most recently Britain, due to fiscal issues.

Beers said: “U.S. policymakers are still talking about it, but others are beginning to act.”

If S&P were to take the next step in downgrading the U.S., it would lower its rating by a single notch to AA+ from the current AAA, according to Beers.

When asked about the future of the U.S. dollar, Beers said the greenback’s status as the world’s reserve currency remains “well entrenched” given Europe’s own debt woes and Japan’s burden to rebuild after last month’s massive earthquake.

“The dollar is relatively attractive and would be for some more years to come,” he said.

Reporting by Richard Leong and Ryan Vlastelica, Editing by Chizu Nomiyama

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