(Bloomberg News) David Beers may be the most influential political commentator in the country right now, even though he's hardly a household name, that isn't technically his job and he's only visiting.
As the London-based managing director of sovereign credit ratings at Standard & Poor's, Beers will help determine whether the U.S. government's credit rating will be downgraded as a result of the battle over raising the debt limit.
His company has gone beyond competing credit rating agencies to say that it isn't enough for lawmakers to agree to lift the government's $14.3 trillion debt ceiling. Congress and the White House also must agree to a deficit-reduction package to avoid a downgrade in the government's AAA credit rating.
In an interview this week at Union Station, just blocks from the U.S. Capitol, Beers said he views the debt limit fight as a test of lawmakers' willingness to tackle the deficit.
"For us, the issue is not the debt limit -- it's the underlying fiscal dynamics," said Beers, who has been rating governments for the company for 20 years. "It's not obvious to us that this political divide that is proving so difficult to bridge is going to be any more bridgeable three months from now or six months from now or a year from now."
He said he didn't know when an S&P committee would decide whether to cut the credit rating. "Depends on events," he said.
Downgrade Impact
A decision to cut the government's credit rating would likely increase Treasury rates by 60 to 70 basis points over the "medium term," raising the nation's borrowing costs by $100 billion a year, JPMorgan Chase & Co.'s Terry Belton said. It could also hurt the rest of the economy by increasing the cost of mortgages, auto loans and other types of lending tied to the interest rates paid on treasuries.
The threat of a downgrade has made Standard & Poor's a target for critics chafing at demands from a company that blessed the mortgage-backed securities that led to the financial crisis.
S&P Hill Critics
An April report by Senator Carl Levin, a Michigan Democrat, and Senator Tom Coburn, an Oklahoma Republican, concluded the credit agencies "weakened their standards as each competed to provide the most favorable rating to win business and greater market share. The result was a race to the bottom."