Los Angeles Times (MCT)
WASHINGTON — Standard & Poor's downgraded the U.S. government's credit rating Friday for the first time in history, saying the recent plan worked out to raise the federal debt ceiling "falls short" of what's needed to stabilize the nation's longer-term finances.
The credit rating agency also said the partisan stalemate that put the U.S. on the brink of default this week did not bode well for efforts to reduce the nation's soaring debt.
"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," said S&P, one of three leading credit rating agencies.
"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 AA-plus rating 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 effect of S&P's move could be muted because U.S. 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.