According to S&P, the cut was made due to the government’s budget deficit and heavy debt burden. “The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics,” S&P said in a statement.
They have indicated that the nation’s economic outlook is bleak and the rating downgrade will likely raise borrowing costs for American consumers and the government. The S&P 500 stock index fell 10.8 percent in the last 10 days due to concerns about the U.S. economy and the European debt problem.
The rating agency had put the U.S. credit rating up for review on July 14 due to concerns that Congress had not been adequately addressing the debt ceiling crisis. The Obama administration has had conflicts with S&P during congressional negotiations, accusing them of changing the standard to lower credit ratings.
This is the first time the United States has had a less-than-top tier rating since 1941.
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