Sen. Tom Coburn, R-OK on Monday - reacting to a 2 year warning on the nation's pristine credit rating - said Democrats and Republicans needed to reach a deal on cutting the nation's long-term deficits ahead of the November 2012 election, cautioning against waiting for the perfect political moment to tackle the problem.
On Monday, S&P placed a negative outlook on the U.S. AAA credit rating, and warned of a downgrade in 2013 if Washington failed to reach a political deal to cut deficits. The negative outlook means a one-in-three chance of a downgrade.
President Barack Obama and the House Republican leadership
Waiting until the next election puts our fiscal and national security at risk, Coburn said in a released statement. He warned that negotiating internally would forestall having to deal with foreign governments and international financiers on terms far less favorable than we enjoy today.
China's Foreign Ministry, which holds nearly $1 trillion of U.S. debt in the form of Treasury Securities issued a statement after the S&P announcement.
We hope the U.S. government will take responsible policies and measures to safeguard investors' interests, it said.
White House spokesman Jay Carney said on Monday an agreement is possible by the end of June.
House Majority Leader Eric Cantor, R-VA, tied the S&P announcement to a likely upcoming vote on increasing the U.S. debt limit beyond $14.3 trillion.
He called the S&P warning a wake-up call for those in Washington asking Congress to blindly increase the debt limit.
Treasury Secretary Timothy Geithner on Sunday said he was confident Congress would raise the debt ceiling in the coming months and said the White House and Congress would be working on reducing long-term deficits in parallel with raising the debt limit, but stopped short of linking one legislative process with the other.
Last week, President Barack Obama' proposal on long-term deficits demands spending cuts and tax increases in 2014, if the federal government does not reach its debt-cutting targets.
If, by 2014, our debt is not projected to fall as a share of the economy -- if we haven't hit our targets, if Congress has failed to act -- then my plan will require us to come together and make up the additional savings with more spending cuts and more spending reductions in the tax code, he said.
Excluded from the cuts would be some of the largest federal programs including Social Security, low income programs, or Medicare benefits.
The plans put forward by Obama and Republicans in recent weeks aim to cut the federal deficits by at least $4 trillion in 12 years, and $4.4 trillion in 10 years, respectively.
The U.S. debt-to-GDP ratio, which compares debt to the size of the economy, rose past 9 percent in the most recent financial crisis as Congress authorized the Treasury to invest hundreds of billions of dollars in banks and other financial institutions, and the Federal Reserve Bank boosted the money supply by trillions of dollars after banks and investors pulled back sharply on investments and lending.
The European union has set a 3 percent debt-to-GDP ratio as a manageable ratio for its member governments.
The Obama plan foresees the debt-to-GDP ratio decreasing to 3.1 percent by 2021, while Republicans anticipate that the figure will fall to 1.6 percent by the same time period.