A downgrade of the United States' credit rating would raise the nation's borrowing costs by $100 billion a year, Bloomberg said, quoting a report by the JPMorgan Chase & Co. (JPM) investment bank.
In fiscal year 2010, the United States spent $414 billion on interest payments to the holders of the national debt, or 2.7 percent of GDP, according to the country's Treasury Department.
Ratings agency Standard & Poor's downgraded on Friday the United States' top-notch AAA credit score by one notch to AA-plus for the first time ever, citing concerns about the country's record budget deficits and rising debt burden. In addition to the downgrade, S&P issued a "negative" outlook for the United States, meaning that further downgrade may follow within the next two years.
S&P said last-minute legislation passed in Congress earlier this week to raise the U.S. debt ceiling and avert a financial default "fell short" of easing the nation's crippling deficit.
The bill, passed on Tuesday just 10 hours before the expiry of a deadline to raise the U.S. borrowing limit, increases the federal debt ceiling by up to $2.4 trillion from the current $14.3 trillion, and reduces the fiscal deficit by at least $2.1 trillion over 10 years.
The Obama administration reacted with anger to the downgrade of the U.S. credit rating, saying that the New York-based firm's estimates were "deeply flawed." A Treasure Department spokesman said there was a $2 trillion error in the agency's analysis.
