FILE - This Monday, Aug. 1, 2011 picture shows the U.S. Capitol just after the House voted to pass debt legislation on Capitol Hill in Washington. Credit rating agency Standard & Poor's says it has downgraded the United States' credit rating for the first time in the history of the ratings. The credit rating agency says that it is cutting the country's top AAA rating by one notch to AA-plus. The credit agency said late Friday, Aug. 5, 2011 that it is making the move because the deficit reduction plan passed by Congress on Tuesday did not go far enough to stabilize the country's debt situation. (AP Photo/Jacquelyn Martin)
WASHINGTON (AP) -- Credit rating agency Standard & Poor's on Friday downgraded the United States' credit rating first time in the history of the ratings.
"This is a wake-up call for Washington to get serious about fixing our debt problem," U.S. Sen. Saxby Chambliss, R-Moultrie, said in a statement issued moments ago. "Many of us have long argued that Congress must make the hard choices to address this issue immediately, and I can only hope this helps others in Washington and around the country understand our urgency. Substantial, meaningful reform that results in a pro-growth tax system, entitlement reforms and spending reductions must be implemented as soon as possible.
The credit rating agency said that it is cutting the country's top AAA rating by one notch to AA-plus. The credit agency said that it is making the move because the deficit reduction plan passed by Congress on Tuesday did not go far enough to stabilize the country's debt situation.
A source familiar with the discussions said that the Obama administration feels the S&P's analysis contained "deep and fundamental flaws."
S&P said that in addition to the downgrade, it is issuing a negative outlook, meaning that there was a chance it will lower the rating further within the next two years. It said such a downgrade to AA would occur if the agency sees less reductions in spending than Congress and the administration have agreed to make, higher interest rates or new fiscal pressures during this period.
S&P first put the government on notice in April that a downgrade was possible unless Congress and the administration came up with a credible long-term deficit reduction plan and avoided a default on the country's debt.
After months of wrangling and negotiations with the administration, Congress passed this week a debt reduction package at the 11th-hour that averted a possible default.
In its statement, S&P said that it had changed its view "of the difficulties of bridging the gulf between the political parties" over a credible deficit reduction plan.
S&P said it was now "pessimistic about the capacity of Congress and the administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics anytime soon."