After the downgrade was announced, House Speaker John A. Boehner, blamed President Obama and congressional Democrats for not doing more to reduce the deficit, even though Obama had pushed for a much larger "grand bargain" that included tax increases and cuts to entitlement programs, such as Medicare.
S&P one of three leading credit rating agencies said, "The political brinkmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective and less predictable than what we previously believed."
"The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy."
U.S. debt now will carry a rating of AA-plus instead of the coveted AAA, dropping it into the same general category as countries such as Japan, China, Spain, Taiwan and Slovenia.
The downgrade could increase U.S. borrowing costs because its bonds could be considered more risky. The higher interest rates the U.S. Treasury might have to charge for its bonds could spill over into other areas, such as mortgages.
But the impact of S&P's move could be muted because Treasury bonds are still considered a safe haven, particularly in stressful financial conditions. In addition, the other two leading credit rating agencies — Moody's Investors Service and Fitch Ratings decided this week to keep their AAA rating for U.S. debt for now.
Both those firms, however, warned that a downgrade could come if the nation didn't do more to reduce its debt, now at more than $14.3 trillion.
S&P said it agreed to change the economic projections but that it did not affect the ratings decision.
Reid said, "The action by S&P reaffirms the need for a balanced approach to deficit reduction that combines spending cuts with revenue-raising measures like closing taxpayer-funded giveaways to billionaires, oil companies and corporate jet owners."
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