One of three major credit rating services downgraded the U.S.' perfect credit rating, stating the nation's warring political leaders mishandled negotiations over how to raise the debt ceiling to avoid a default, published reports indicate.
The reduction to the globe's top economy was administered late Friday by Standard & Poor's, according to
The Washington Post. The two additional services, Fitch's and Moody's Investors Service, said they have now plans to follow suit, The Boston Globe reports
. The rating, which was intact from the close of World War One, slips from AAA to AA+.
On top of slashing the rating, the service also said the nation's outlook is negative, Marketwatch reports
"The political brinksmanship 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," according to
Standard's & Poor.
Though Republican and Democratic leaders ultimately agreed on a plan to reduce more than $2.1 trillion in budget savings prior to August 2, when the nation would have defaulted on repaying loan obligations, the debate often was acrimonious, partisan, divisive and harmful for the nation. The legislation that President Obama signed also included spending reductions.
S&P stated U.S. debt will not be effectively tempered over time with the plan that leaders hashed out in Washington. Rather, the country will be unable to accumulate more savings looking forward.
"It's always possible the rating will come back, but we don't think it's coming back anytime soon," David Beers, head of S&P’s government debt rating unit, told the Washington Post.
The downgrade closed a rough week in the U.S. Political leaders pushed the debate to just shy of the Tuesday deadline, causing jitters and consternation to markets domestically and the world over.
Thursday saw the Dow Jones Industrial average plummet more than 500 points, then kick off Friday trading with advances of more than 100 points before losing the gains and closing the week having returned to positive territory.
The credit rating reduction is likely to negatively impact the U.S. government, consumers and businesses on a long-term basis as borrowing costs are prone to rise.
The debt issue weighed heavily on S&P's decision as the U.S. is saddled by $14-trillion-worth of obligations. The plan that was finalized early last week did not satisfy the service.
"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," the service's report states.
Political leaders and policy makers drew the enmity of the service, which indicated it first gave notice of the danger present in mid April.
Since then, the activity and process to settle the issue and prevent it from becoming damaging was under scrutiny, raised eyebrows and, ultimately, induced the service to apply the downgrade.
"More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011," the report states.
But the U.S is not the only nation struggling with debt issues. The European Union has five countries that are teetering on insolvency if not fully immersed. Known as the PIIGS nations - standing for Portugal, Italy, Ireland, Greece and Spain - the countries are at different levels of dealing with debt-hobbled banks and beleaguered public finance systems.
Ireland and Greece have accepted international aid bailouts, Portugal was believed to be on the brink of requesting a bailout, and Italy and Spain - two of the region's stronger economies - are under scrutiny for capture by the crisis.