Standard and Poors

Standard and Poors (S&P) warned on July 14 that it would reduce the credit ranking of the U.S. by one level. Indeed, on Thursday, S&P lowered the nation’s AAA credit rating one level to AA+.

The ratings company said that the deficit-cutting plan signed by President Barack Obama this week after months of wrangling with Congress falls short of what “would be necessary to stabilize the government’s medium-term debt dynamics.”

The Treasury disagreed with S&P’s assessment and judged the analysis was carried out hastily, said a person familiar with the matter who declined to be identified because the discussions were private.

The ratings firm erred in estimating discretionary spending levels at $2 trillion higher than what the Congressional Budget Office estimates, the person said.

S&P threats that it may lower the long-term rating to AA within the next two years if spending reductions are lower than agreed to.