Standard & Poor's Lowers USA Long Term Rating to AA+ For First Time in 70 Years

On August 5, 2011, the Standard & Poor's Rating lowered the United States of America's long-term sovereign credit rating from AAA to AA+ for the first time in 70 years.  Regarding its short-term rating, the S&P affirmed the A-1+ rating.

Why is this significant news?

The USA is officially entering a new financial era that reflects upon the current behavior and cultural trend that has been evolvling perhaps since the 1960s.  Given the August 2, 2011 passage of the Budget Control Act Amendment of 2011, the US fiscal policy has assuaged immediate concerns about any immediate threat of payment default as the US government continues to encounter political governance that is less stable, less practical and less cooperative between political parties to resolve matters of most importance.  In other words, the United States is heavily debt-laden, and the question of the currency and its valuation to repay the debt is of grave concern.

Standard & Poor's report presents sound financial rationale and perspective on the current outlook.  It is well worth anyone's time or effort to read these unbiased facts.

Concerning military personnel, it is going to be a rocky road between now and 2012 as the government debt burden will go higher and as the baby boom generation marks its draw on social security, medicare and such.  Cuts and reductions are on the horizon for civilian discretionary spending, defense and Medicare. 

Donald Marron presents more interesting financial perspective.  Moody's and Fitch have affirmed the USA's crediting rating at AAA while China's Datong credit rating agency lowered it earlier this week to negative.  Donald is right to expect more US downgrades regarding debt.  There are five countries in the past 30 years who have regained an S&P AAA rating so there is hope for the US to regain this rating but it will come at political crossroad that many are very VERY concerned about.

There will be more news reporting (as well as hype).  Political parties will blame the other.  The American consumer is awakening to a reality that has been evolving for quite sometime.  Question is Will our elected officials in Congress and the Administration be able to work something out?  I am pessimistic at this juncture and am discouraged for my husband and all the men and women who work in the military as well as those hardworking Americans who do work, who do do the right thing and who do NOT sit on their buts and let someone literally feed them with every materialistic item out there.  We may even see taxes rise on both incomes and investments in ways we've not seen for awhile. 

For many who serve in the military, it is likely that many cutbacks will occur as the defense department will downsize the military (now I do not know this for a fact....this is only my opinion).  Perhaps it is raising the military to be more sophisticated and effective by doing more with less.  If you read the Forbes article on where our next corporate America managers are coming from, it is the military.  I believe that serving in the military will rise in prestige as Americans begin to appreciate the high level of quality, education and training these men and women have received.  Life for the military spouse will become more isolating.  Reliance on social networking and certain other networks will increase with importance for the military families. 

Regarding finances and military pay, it is challenging for many to make it without dual income, and for many military spouses, that's challenging to have a career as the military relocates you and your family every 2-4 years. 

In a previous blog, I posted information for disabled veterans and those who have served our country about the Concurrent Retirement and Disability Pay (CRDP). Qualified disabled military retirees will get paid both their full military retirement pay and their VA disability compensation as stated earlier this year.  I believe that there is elevated risk as to how our disabled veterans will be compensated.  There is not much research or information surfacing about this all important financial issue (something that frustrates me for our fallen comrades).  I find it strange that the US government would not provided proper financial support; however, those who were most skeptical about the War in Iraq do not view favorably our disabled veterans and admonish this liability that could potentially increase in costs for many years to come.  I hope that there is a rise in foundations, non-profit groups or grants for disabled veterans that will lend financial assistance and offset an increasing negative sentiment from those who served.  (Currently I am working on another blog article about CRDP).

The best gift that any and all of us can do is to pay off your debt.

Perhaps by starting with the little details that don't seem to really matter we can make a difference and alert Congress and the Administration to the importance of paying off our debt.  Eventually, the S&P credit rating for this wonderful country will rise back to AAA status (or as Warren Buffet eloquently stated....we've been at a AAAA+ rating only to see the slight pullback to AAA).