Is it all over for the US credit rating future?

The Standard & Poor’s rating agency has downgraded the US credit rating from AAA (where it has stood since 1917) to AA+ in early August. S&P has indicated US’s poor fiscal consolidation plan which could cause “inadequate medium-term debt stabilisation” as the reason for the downgrade. It was also called the “tea party downgrade” as the Tea Party wanted a stronger “Cut, Cap, Balance” policy to achieve $4trillion in cuts. Obama has planned for a $2.1trillion improvement of budget deficit in 10 years, where S&P believes it should have been $4trillion. However, the other two rating agencies, Fitch and Moody’s, have retained the rating of AAA although Moody’s will likely downgrade the US sovereign credit rating in a year or two. There are currently 16 countries (mostly in Western Europe) with an AAA rating, interestingly, all of which have a socialized healthcare system. The immediate impact will be on stock indices and index funds, due to the fear of a double-dip recession – but the implementation of health care reforms and reduction of unemployment figures from 9+% to at least 6+% can help US regain its debt credibility in the long term.