WASHINGTON — A top official at rating firm Standard & Poor's said Friday the company's decision to downgrade U.S. government debt for the first time in 70 years was due in part to Washington's political paralysis surrounding raising the debt ceiling.
The "conclusion was pretty much motivated by all of the debate about the raising of the debt ceiling," John Chambers, chairman of S&P's sovereign ratings committee, said in an interview. "It involved a level of brinksmanship greater than what we had expected earlier in the year."
Congress raised the country's $14.29 trillion debt ceiling on Tuesday, just hours before the country could have begun defaulting on some of its obligations. The debt ceiling talks were delayed so long, and at times became so acrimonious, that it led some to question whether the debt ceiling would be raised or if the U.S. could inch toward default.
S & P on Friday lowered its rating of long-term U.S. debt from AAA to AA+, saying the trajectory of future U.S. debt was unsustainable. It broke from rivals Moody's Investors Service and Fitch Ratings, which have recently upheld their top-notch ratings for U.S. debt despite concerns about future problems.
U.S. government officials on Friday were furious at S & P's move and challenged the methodology the company used to reach their conclusion, saying it was riddled with errors.
Earlier in the day, Obama administration officials discovered a $2 trillion error in S&P's mathematical conclusions. S&P officials huddled after the mistake was uncovered but decided to stand by their rating despite pleas from the Treasury Department to delay any decision for several days. Company officials acknowledged the mistake but didn't believe it was as significant as their counterparts at the Treasury,
The mistake was a technical one, though it would have large implications. It concerned the future ratio of U.S. debt to the size of the economy, with S&P officials projecting a larger share than many experts.
S&P rates the debt of 126 countries, and fewer than 20 were rated AAA before this week. Once a country loses an AAA rating, it can be very hard to win back.
"We've had five governments that have lost their AAA rating and have gotten it back," Mr. Chambers said. "The length of time is between nine and 18 years."
Mr. Chambers wouldn't say whether the decision by S & P officials to downgrade U.S. debt was a unanimous vote by its committee.
Many budget experts have said for years that the U.S.'s fiscal problems, driven in part by an aging population and ballooning health care costs, were unsustainable and needed to be addressed. S & P warned several weeks ago that it could downgrade U.S. debt if a deficit-reduction plan being negotiated by congressional leaders fell short of a $4 trillion, 10-year package. And the $2.1 trillion to $2.4 trillion deal that was eventually brokered fell far short of earlier goals.
Obama administration officials are likely to argue that S & P shouldn't have based their historic decision on political posturing and wrangling and even a flirt with near-default. Mr. Chambers said the political "settings" of a country are a key factor in S & P decisions, and the messy fight over the debt ceiling could not be ignored. He said it made company officials question whether the U.S. government will be able to seriously tackle its long-term fiscal challenges.
"The kind of debate we've seen over the debt ceiling has made us think the United States is no longer in the top echelon on its political settings," Mr. Chambers.
