Standard & Poor's Downgrades U.S. Credit Rating

By Jon E. Dougherty at 6 Aug 2011

(Newsroom America) -- Credit rating agency Standard & Poor's downgraded the U.S. credit rating for the first time in the nation's history Friday night, blaming its action in part on American politics.

The agency lowered the nation's rating to AA+, one notch below AAA, saying in a statement that "political brinkmanship" over legislation to raise the nation's debt ceiling made the government's ability to manage its finances "less stable, less effective and less predictable."

"It’s always possible the rating will come back, but we don’t think it’s coming back anytime soon," said David Beers, head of S&P’s government debt rating unit, according to the Washington Post.

The Treasury Department and the Obama administration fought the decision all day Friday, arguing the rating agency's political analysis was flawed and that it overstated the nation's debt over the next 10 years.

The downgraded rating is likely to have a negative effect on global markets, but it wasn't clear Saturday what that would look like when markets reopened next week. Asian markets open Sunday night and the effects of the S&P's decision could be seen then, analysts said.

The AAA rating made the U.S. Treasury bond one of the safest investments, and it has allowed the government to continue borrowing money at cheap rates so it could finance a pair of wars and generous social entitlements.

The U.S. has had a AAA rating for 70 years.

Over time, the reduced rating could push up borrowing costs, making it more expensive for the government to take out loans to pay its bills and costing taxpayers tens of billions of additional dollars per year, the Post reported.

Republicans pounced on the news, blaming the White House for policy decisions they say led to the downgrade.

"Standard & Poor’s rating downgrade is a deeply troubling indicator of our country’s decline under President Obama," said leading GOP presidential contender Mitt Romney.

S&P's had warned for weeks that a potential downgrade was in the offing. The warnings angered U.S. government officials, but they did not rattle bond markets.

© 2010 Newsroom America.

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