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S&P's Marie Cavanaugh Answers 'How Likely Is A Debt Downgrade?'

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S&P's Marie Cavanaugh Answers 'How Likely Is A Debt Downgrade?'

Rating analyst and managing director for S&P's sovereign-ratings group Marie Cavanaugh appeared on CNBC's Squawk Box Friday morning where she talked about the chances of downgrading the United States' debt

"We changed the outlook to stable earlier this year for, because of the improvement in our view in the deficit, which has fallen to about half of its level in 2011. Our expectations are going to continue to fall. The fact that there was compromise in lessening the impact of the so-called fiscal cliff, and because the economy has been on stronger footing," said Cavanaugh. 

A stable outlook means that they see a less than one in three chance that a rating change will occur in over the next two years. 

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She believes that a debt downgrade is unlikely at this point because the debt ceiling probably won't be broken. If the debt ceiling is not raised on time, however, the immediate result will be a block on new financing, Cavanaugh said.

"That's assuming that no other remedies are pursued, and that means that the government probably has to cut spending by anywhere of 15 to 20 percent, which will have an impact not he economy," said Cavanaugh. 

At the time of this writing, Jason Cunningham had no position with the mentioned entities. Visit Jason on Twitter @JasonCunningham.

 

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