A gloomy forecast for the economy

Historically, there has been a truism that investors have been able to depend on, through good times and bad: the United States economy is a good economic risk and a safe refuge for investment.

So, it should come as no surprise that a media advisory by Standard and Poor's sent shockwaves through the economic community yesterday as the group threatened to downgrade its AAA bond rating for the United States economy in coming years.

Here's the link:

http://www.standardandpoors.com/ratings/articles/en/us/?assetID=1245302886884

And, you can find out more about how ratings like this are calculated here.

To sum it up, Standard and Poor's changed its overall forecast of our economic health from "stable" to "negative." It believes the size of our national debt and our inability to balance the budget could soon eclipse the enormous size and diversity that have traditionally made our economy so strong. What are the chances these factors will lead to a downgrade of the economy in the next two years? At least one in three.

The announcement by Standard and Poor's is basically a stunning repudiation of any happy talk about the United States economy improving and an indictment of political leaders for their inaction on pressing economic problems. Elected officials in Washington, D.C. need to take immediate notice. Many speculate that the Standard and Poor's rating could be politically-motivated. But even if it is, the underlying factors are indisputable, non-partisan, and in urgent need of remedy.

And, for that matter, political leaders in all fifty states should take heed of these predictions, as the story really isn't that different when it comes to state budgets. To understand more about our position here in Massachusetts, check our out recent blog post about the condition of the state budget.