According to reports the S&P cut the rating, saying there was a chance it could be downgraded again within two years if progress is not made cutting the huge government budget gap.
According details it was the first time the US was downgraded since it received an AAA rating from Moody’s in 1917; it has held the S&P rating since 1941.
The rating came after a strong push back from the White House, which called S&P’s analysis of the economy deeply flawed.
A Treasury spokesperson alleged that there was a “two trillion dollar error” in the S&P analysis, without offering any immediate explanation.
The blow came after the White House, Democratic and Republican lawmakers finally agreed on Tuesday to a deal to raise the nation’s debt ceiling after months of wrangling which sent jitters rippling through the global economy still trying to recover from the 2008 recession.
A debt downgrade will be a symbolic embarrassment for President Barack Obama, his administration and the United States, and could raise the cost of US government borrowing.
There were also worries that the downgrade would wreak unpredictable havoc in global financial markets where the US dollar has long been the most important currency.