Per msnbc.com: http://www.msnbc.msn.com/id/44040574...s_and_economy/

"WASHINGTON — The United States lost its top-notch AAA credit rating from Standard & Poor's Friday, in a dramatic reversal of fortune for the world's largest economy.

S&P cut the long-term U.S. credit rating by one notch to AA-plus. The credit agency said late Friday that it was making the move because the deficit reduction plan passed by Congress on Tuesday did not go far enough to stabilize the country's debt situation.

U.S. Treasuries, once undisputedly the safest investment in the world, are now rated lower than bonds issued by countries such as the United Kingdom, Germany, France or Canada.

The move is likely to raise borrowing costs eventually for the American government, companies and consumers.

"The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics," S&P said in a statement.

The decision follows a bitter political battle in Congress over cutting spending and raising taxes to reduce the government's debt burden and allow its statutory borrowing limit to be raised.

On Tuesday, President Barack Obama signed legislation designed to reduce the fiscal deficit by $2.1 trillion over 10 years. But that was well short of the $4 trillion in savings S&P had called for as a good "down payment" on fixing America's finances.

The political gridlock in Washington and the failure to seriously address U.S. long-term fiscal problems came against the backdrop of slowing U.S. economic growth and led to the worst week in the U.S. stock market in two years. The S&P 500 stock index fell 10.8 percent in the past 10 trading days.

"When they finally dealt with the debt ceiling, they obviously kicked the can down the road, and the market did not need that. I thought at the time when they released it there would have been a downgrade," said William Larkin, fixed income portfolio manager at Cabot Money Management in Salem, Mass.

"I don't think it is a great shock. If it didn't happen now, I think it probably would have happened in a couple of months.

"A double-A plus is not a big issue, but it is going to have an impact. There are going to be ripples going across the pond."

The outlook on the new U.S. credit rating is negative, S&P said, a sign that another downgrade is possible in the next 12 to 18 months.

U.S. government officials had been bracing for a downgrade.

CNBC's John Harwood reported that S&P told the federal government at 1:30 p.m. ET Friday that it was preparing to downgrade the country's rating. But Harwood reported that after U.S. officials pointed out an error in how S&P computed the ratio of U.S. debt to the gross domestic product, S&P decided to reconsider.

A source said S&P's calculations were off by "trillions," CNBC reported. A source familiar with the discussions said that the Obama administration believes S&P's analysis contained "deep and fundamental flaws."

On July 14, S&P put the government on a credit watch with negative implications, meaning there was at least a one in two chance the U.S.’s long-term debt would be downgraded within 90 days.

After Congress reached a deal this week on budget cuts valued at about $2.1 trillion over 10 years, the other two main rating agencies reaffirmed the nation's top credit rating status for now, although they said they would continue to evaluate the situation.

Moody's assigned a negative outlook for U.S. sovereign debt, meaning it could still downgrade the securities, although probably not anytime soon. Moody's said there would be a risk of a downgrade if there is "a weakening in fiscal discipline, a deterioration in the economic outlook or if Congress fails to adopt more deficit-reduction measures in 2013."

Another major agency, Fitch, said it would complete its review of the nation's sovereign debt rating by the end of August and did not rule out a downgrade.

The downgrade could result in higher market interest rates and could force some fund managers to sell Treasury securities. But it is unclear what the result will be with only one of the major agencies issuing a downgrade.

The rating agencies have been under fire since the financial meltdown of 2008 because they often gave high ratings to bundles of mortgage-related securities that were risky and ultimately failed. "