Chambers added in the interview that even if the parties agree to raise the debt ceiling, it may not be enough to avert a downgrade. Chambers said the country must implement a plan to reduce the annual budget deficit by roughly $4 trillion over 10 years, which makes the debt manageable over the long term.
The White House and Congress have discussed a plan that big, but negotiations have more recently centered on a smaller deal, at $2 trillion or less.
“That could still lead to a downgrade,” Chambers said.
An important statement from S&P: all the noise about a downgrade isn’t only about the debt limit. There are fiscal issues too. Which I have to say I’d like to see spelled out, given that the US borrows entirely in its own currency.