S&P Downgrade Is 'Troubling News for Manufacturers'

Aug. 8, 2011
NAM: 'Lower credit rating will have negative ripple effect throughout supply chain'

After Standard & Poor's stripped the United States of its AAA credit rating late Friday, "manufacturers are bracing for a negative impact on many levels," the National Association of Manufacturers said this weekend.

"This downgrade by just one of the three agencies is troubling news for manufacturers because higher interest rates are now on the horizon," NAM President and CEO Jay Timmons said.

Considering the fragility of the economy, higher borrowing costs "will have ripple effects," Timmons added.

"Most notably, they will hinder recovery in the housing market, which has a direct impact on manufacturing."

Not good.

Given that this has never happened before, Timmons acknowledged "the magnitude of the downgrade is somewhat unknown." But he predicted that higher interest rates likely will crimp the ability of government agencies to borrow money.

"These governments invest in infrastructure, and manufacturers build their roads and schools," Timmons said. "If borrowing costs go up for these governments, manufacturers may see a slowdown -- this will impact jobs and job creation during a time of historically high unemployment."

In light of the unprecedented downgrade of the U.S. credit rating, NAM urged lawmakers in Washington to implement a pro-growth strategy.

"We need regulations that are balanced and clear, a tax code that is competitive, and an agenda that fosters job creation," Timmons said.

The U.S. Chamber of Commerce called the S&P downgrade "another powerful incentive for lawmakers to do the hard work necessary to get our fiscal house in order."

"We will never tackle debts and deficits, jumpstart this recovery, reduce uncertainty and create millions of jobs until we overhaul our tax code and reform runaway entitlement programs that threaten to push us into insolvency," asserted Chamber President and CEO Thomas Donohue.

Timmons emphasized that rising interest payments will increase the federal debt, making it necessary for lawmakers "to evaluate every line item in the federal budget."

"If the expenditure is not directly related to growth, it needs to be seriously reviewed to determine if the program needs to be modified, reduced or eliminated," Timmons said.

"Now is the time for difficult decisions and priority setting to take place in Washington. We need leadership from our policymakers."

In Washington, there's been plenty of blame thrown around for the downgrade.

On NBC's "Meet the Press" Sunday, Sen. John Kerry, D-Mass., blamed the Tea Party. Later in the program, Sen. John McCain, R-Ariz., blamed President Obama.

U.S. Rep. George Miller, D-Calif., blamed Republicans.

"Standards and Poor's downgrade should be a wakeup call to Republicans in Congress who have manufactured this political crisis in order to push their reckless ideological demands, and the media that have largely bought into their dangerous rhetoric," Miller said over the weekend.

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