The rating agency Standard & Poor’s downgraded the United States’ credit rating for the first time ever, Friday night.
“We have lowered our long-term sovereign credit rating on the United States of America to ‘AA+’ from ‘AAA,’” a statement from S&P read.
The move came amid a rough week, economy-wise, with the Dow dropping and stock market slipping for nine consecutive sessions. On Thursday the Dow dropped 4.31 percent — 512 points — erasing the gains made so far in 2011.
S&P’s downgrade comes after Congress settled on an agreement earlier this week to raise the debt ceiling. S&P was the one agency that warned throughout the debate that the nation’s deficit problem needed to be tackled with a debt limit increase, combined with significant spending cuts.
The agencies Moody’s and Fitch upheld the nation’s AAA rating Tuesday after President Barack Obama signed the debt deal into law.
A downgrade in the credit rating means the cost of borrowing will increase and interest costs will rise, which affects both consumers and businesses.
“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,” reads the S&P statement. ”
“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 statement continued.