The United States has lost its top-notch AAA credit rating for the first time ever.
Standard & Poors has downgraded the US to AA+ in a dramatic reversal of fortune for the world’s largest economy.
The move is likely to raise borrowing costs in America.
S&P says the fiscal consolidation plan agreed earlier this week falls short of what is needed but Washington insists the agency has made a two trillion dollar error in its calculation.
Republican presidential hopeful, Michele Bachmann, was among the first to react publicly.
“I call on the President to seek the immediate resignation of Treasury Secretary Timothy Geithner and to submit a plan to the American people with a list of cuts to balance the budget this year, turn our economy around and finally put the American people back to work,” she commented.
President Barack Obama was given advance warning of the downgrade.
S&P has criticised the political gridlock in Washington and indicated a further downgrade could follow in the next 12 to 18 months.