Standard & Poors downgraded the U.S. government credit Friday for the first time in history, saying the recently developed plan to raise the federal debt ceiling "falls short" of what is needed to stabilize the country's long-term finance.
The rating agency also said the partisan stalemate that put the U.S. the brink of failure this week does not bode well for efforts to reduce the growing debt of the nation.
"The political brinkmanship in recent months highlights what we see as the U.S. government policy and increasingly less stable, less efficient and less predictable than previously thought," said S & P, a of the three major credit rating agencies.
"The legal debt ceiling and the threat of failure have become political bargaining chips in the debate on fiscal policy."
U.S. the debt will now have a rating of AA-plus instead of the coveted AAA, placing it in the same general category in countries like Japan, China, Spain, Taiwan and Slovenia.
The downgrade could raise U.S. borrowing costs because the bonds could be considered more risky. The higher interest rates is the U.S. Treasury might have to charge for its bonds could be extended to other areas, such as mortgages.
But the impact of S & P movement could be silenced because Treasuries are still considered a safe haven, especially in stressful financial conditions. Furthermore, the other two major rating agencies - Moody's Investors Service and Fitch Ratings - decided this week to keep its AAA rating for U.S. debt for the moment.
Both companies, however, warned that a cut could come if the nation does not do more to reduce its debt, currently at more than $ 14.3 trillion.
However, the reduction of S & P was a blow to the reputation of the nation. And when the announcement comes on Friday night after a long week of turmoil in financial markets, "looks like a low blow," said Mark Vitner, economist at Wells Fargo.
"Why do it now?" He asked.
Obama Administration officials were angry, saying that the rebate is based on a faulty analysis.
S & P initial miscalculation of U.S. $ 2 billion in its economic projections, which administration officials noted Friday afternoon when the company shared its analysis with them before the public release, said a person familiar with the situation who requested anonymity because of the sensitivity of the issue.
However, S & P would not agree to change the score or take more time to do a new analysis, the source said.
"A trial flawed by an error of 2 billion dollars speaks for itself," said a spokesman for the Treasury Department.
S & P said it agreed to change the economic projections, but did not affect the rating decision.
Shortly after the cut was announced, the House of Representatives John A. Boehner (R-Ohio), blamed Obama and congressional Democrats for not doing more to reduce the deficit, even though Obama had pushed for a much larger "grand bargain" that includes tax increases and cuts to programs social assistance, such as Medicare.
"This decision by S & P is the latest result of runaway spending that has taken place in Washington for decades," said Boehner.
Senate Majority Leader Harry Reid (D-Nev.) said the solution would have to include income increased.
"The action of S & P reaffirms the need for a balanced approach to deficit reduction, spending cuts that combines the revenue-raising measures such as closing taxpayer-funded gifts to billionaires, oil companies and owners corporate jets, "said Reid.
