US debt rating downgraded
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The United States credit rating was cut for the first time in history Friday. Ratings agency Standard & Poor's said the country's politicians are increasingly unable to come to grips with its massive debt.
S&P cut the US rating from AAA to AA+, and said there was a chance it could be further downgraded in 2013 if progress is not made cutting the huge government budget gap.
It said the "political brinksmanship" of recent months shows that governance in the country is becoming "less stable, less effective, and less predictable," signalling that the
country's reliability for paying its debts had decreased.
It was the first time the US was downgraded since it received an AAA rating from Moody's in 1917.
The White House called S&P's analysis of the economy deeply flawed and politically-based.
A Treasury spokesperson alleged that there was a "two trillion dollar error" in the S&P analysis.
But John Chambers, chairman of the S&P sovereign ratings committee, defended the decision.
"This is a problem a long time in the making whether this administration and prior administration," he said on CNN.
He pointed to Democratic and Republican lawmakers battling for months until the country was on the precipice of default last Tuesday before they finally agreed to a deal to raise the nation's debt ceiling and slash the deficit.
A debt downgrade will be a symbolic embarrassment for President Barack Obama and the United States, and could raise the cost of US government borrowing.
There were also worries that the downgrade would wreak unpredictable havoc in global financial markets where the US dollar has long been the most important currency.
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