China rips U.S. on debt-rating downgrade
White House says nation “must do better” in deficit work

The White House on Saturday responded to the downgrade by urging political factions to join forces to repair the U.S. economy and put the country’s fiscal house in order.

“The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone,” China’s state-run Xinhua News Agency said Saturday, in Beijing’s first official response to the S&P action, according to wire service reports.

“China, the largest creditor of the world’s sole superpower, has every right now to demand the United States to address its structural debt problems and ensure the safety of China’s dollar assets,” it said.
Xinhua said the U.S. must slash its “gigantic military expenditure and bloated social welfare costs” and accept international supervision over U.S. dollar issues.

In cutting its rating of long-term U.S. government debt to AA+, a level below its top-ranked AAA, for the first time, S&P late Friday pointed to the “gulf between the political parties” for reducing its confidence in the government’s ability to oversee its finances.

The S&P, one of three major rating agencies, also said the outlook is negative, with the agency warning of another reduction in two years.

Japan, the second-biggest creditor to the United States, voiced support for its longstanding ally, with a senior Japanese government official saying the trust held in U.S. Treasury notes “and their attractiveness as an investment will not change because of this action,” Dow Jones reported.
But the chief economic adviser to India’s finance ministry said the downgrade has negative implications for the global economic outlook.

“This is a warning signal whether you are in New York, New Zealand or New Delhi,” Kaushik Basu told Dow Jones.

After the S&P action, the U.S. Treasury quickly criticized the move, saying S&P’s analysis provided to the department Friday afternoon contained a sizable error, which overstated the U.S. debt by $2 trillion.

And, in a statement issued after the S&P action, the Federal Reserve said the rating agency’s move would not alter the risk weights for U.S. Treasury securities or others issued or backed by the U.S. government.

In a statement released by spokesman Jay Carney and reported by the Associated Press, President Barack Obama said the negotiations that led to this week’s agreement to hike the U.S. debt ceiling “took too long” and were “at times too divisive.”