Last night Standard and Poors downgraded the United States Credit rating from AAA to AA plus. This was in response to the deficit reduction agreement that the Congress and the President agreed to on Tuesday, the day the Treasury Department said the U.S. would potentially default on its debt obligations. S&P said that the agreement did not go far enough in reducing the deficit and placed blame on all parties.
The measure raises the debt ceiling in several steps and would reduce the federal budget deficit by about $2.1 trillion over a 10-year period, according to the non-partisan Congressional Budget Office.
The bill itself cuts only about $935 billion in federal spending over ten years. The remaining deficit reduction is left to a special committee created by the legislation, the so-called "super committee" made up of twelve members, six each from the House and Senate, and six each from the Democratic and Republican ranks. Congressional leaders have until August 16 to choose the committee members.
The joint committee must recommend at least $1.2 trillion in deficit savings, either through spending cuts or tax revenues. They must report those recommendations to Congress by November 23, and Congress then has one month to approve the recommendations, under special rules.
If the joint committee or Congress fail to act, the bill calls for automatic across-the-board cuts.The cuts would be divided 50-50 between defense and nondefense spending, including Medicare. Social Security and Medicaid would be exempt from those automatic cuts.
The compromise plan also requires the House and Senate to vote on a balanced budget amendment to the Constitution, which would require a 2/3 majority in both houses. That vote must take place by December 31, 2011.
The President signed the plan Tuesday, the same day the Senate passed it. In the Senate, 28 Republicans, 45 Democrats and 1 Independent (Lieberman) voted in favor of the proposal, while 19 Republicans, 6 Democrats, and 1 Independent (Sanders) voted against the agreement. See the full vote here
The Republican-controlled U.S. House approved the plan on Monday. The vote was 269 to 161. 66 Republicans voted against the proposal and 95 Democrats voted in favor. See the full vote here.
During the vote in the House, Arizona Congresswoman Gabrielle Giffords made an emotional appearance on the floor, voting for the first time since surviving an assassination attempt in January of this year. Just before her appearance she tweeted to her followers: "Gabrielle has returned to Washington to support a bipartisan bill to prevent economic crisis. Turn on C‑SPAN now."