S&P laid blame for its decision to assign the AA+ rating directly on the political process in Washington. Even though lawmakers reached a decision on Aug. 2 to raise the government's debt ceiling and avoid a potentially disastrous default, the deficit-reduction package that accompanied the deal won't sufficiently improve the government's fiscal health in the coming years, S&P said in a release Friday. A factor in that projection, S&P said, is that Republicans seem unwilling to allow the Bush-era tax cuts to expire.
"The majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act," S&P said.
The ratings agency said political dysfunction provoked the downgrade, noting that Congress seems to lack the ability to aid the weakening economy. And now, as S&P acknowledged, the downgrade might introduce a new source of strain.
"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," the company said. "The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy."