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S&P: Congress must cut budget by 1 percent of GDP

John Chambers, managing director of sovereign ratings at Standard & Poor's.
Munshi Ahmed | Bloomberg | Getty Images
John Chambers, managing director of sovereign ratings at Standard & Poor's.

Even if Congress reaches a deal to avoid a debt default at the last minute, it must perform more budget consolidation, according to John Chambers, S&P's head of sovereign ratings.

The current impasse in Washington reveals even deeper flaws.

"It highlights this sort of dysfunctionality we have with the budget process," he told CNBC. The shutdown is destabilizing, he said, "but the threat of default would be cataclysmic."

While S&P sees ultimate cooperation on Capitol Hill a possibility, the cost of the economic disruption runs high—about 0.3 percent of gross domestic product each week that the government is shut down, Chambers said.

Besides current measures for controlling the budget, such as sequestration, the government needs to consolidate the budget by about 1 percent of GDP, he said. The debt-to-GDP ratio will continue to deteriorate in the next few years, he added, because of issues related to an aging the population.

"It is better to take measures now" because it will be less costly, Chambers said.

In the debt ceiling of 2011, S&P lowered the U.S. credit rating a notch, to AA+ with a negative outlook but changed that to stable this summer.

(Read more: S&P revises US credit outlook to stable from negative)

Chambers said that if the government misses a payment on the T-bills that are due next week, it will go into a default, but he doesn't see that happening.

"We do think that at the last moment it will be resolved," he said. "We don't think they will miss a debt payment."

By CNBC's Anna Andrianova. Follow her on Twitter @AndrianovaAnna

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