S&P is getting a lot of flak for the downgrade, with suggestions that because they ignored a big math error they were really just playing politics. That criticism misses the point. The downgrade isn’t a consequence of any mathematical formula, it’s a judgment on the behavior of congress (and especially the Tea Party) in last week’s debt ceiling debate. The U.S. very nearly defaulted. The whole purpose of ratings is to warn ahead of time of such an outcome. A post on Actuarial Opinions said it best:
Are you really surprised? AAA debt is supposed to be the ultimate sleep insurance. You park your money there and don’t have to ever worry about it. You don’t have to think about it. It is completely, unquestionably safe. If you didn’t feel that way last weekend, you agree with S&P.
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