Monday Must Read: US Debt Downgrade Prompts Blame Game; California Headed for Big Budget Cuts

Stories you shouldn’t miss:

1. Standard and Poor’s decision to downgrade the country’s credit rating for long-term debt has led to a predictable round of finger-pointing in Washington that could result in yet another downgrade if it continues. S&P cited the inability of Democrats and Republicans to reach compromise on the debt-ceiling deal as a major reason for why the company downgraded the nation’s credit rating. But Democrats and Republicans are already blaming each other for the downgrade, and a grand compromise seems unlikely as the GOP continues to insist that it will not agree to tax increases to help lower the country’s debt.

2. The downgrade, meanwhile, does not appear to be affecting the nation’s economy — at least not in the way economists would expect. Paul Krugman notes in The New York Times that investors have been buying more US debt since the downgrade happened, further driving down the interest rate on treasuries. The downgrade, however, was supposed to have the opposite effect — the driving up of interest rates. The stock market, meanwhile, is down, but Krugman attributes that to continued high unemployment and the general weakness of the economy.

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