"What matters most is the opinion of investors, not of a rating agency, and the collective wisdom of the market is that the U.S. Treasury bond is still the safest asset on the planet," said Mark Zandi, chief economist at Moody's Analytics Inc., of West Chester. "If push comes to shove, would you rather own a French bond or a U.S. Treasury bond?"
David Kotok, president and chief executive officer of Cumberland Advisors Inc., of Vineland, N.J., said the S&P downgrade may have only limited effect on the government's borrowing costs because its ability to service debt remains strong, more robust in fact than any other nation's.
"There is some evidence that the change [in government borrowing costs] could be only a couple of basis points," he said. "We may not notice it because of all the other things going on in the markets."
Kotok voiced scorn, however, for Congress' failure to quickly resolve the issue earlier. The crisis over raising the debt ceiling and the ensuing S&P downgrade was created largely by bickering politicians, he said, and does not reflect underlying economic conditions in the United States.
"The whole thing is bizarre," he said. "It is bizarre because, when it comes down to the capacity to pay, the U.S. has the absolute economic and financial ability to make a timely payment on what it owes, so the substance of the downgrade is due to the behavior of Republicans and Democrats, congressmen and senators."
He added that they "deserve scorn, ridicule, and opprobrium. There isn't enough of it to exhaust the need to lay it on them."
The White House and members of Congress issued statements after the S&P downgrade Friday, urging renewed effort to balance the budget.
