The inability of Congress to rein in the nation's soaring deficits in recent years was at the heart of S&P's concerns. However, the agency did applaud new efforts from both sides of the aisle to tackle the country's long-term fiscal problems. Earlier this month Rep. Paul Ryan, the head of the House Budget Committee, unveiled the Republicans' budget proposal that would slash $4.4 trillion in red ink over the next decade. Just last week President Obama countered with his own plan that would cut $4 trillion in the next 12 years.
"We view President Obama's and Congressman Ryan's proposals as the starting point of a process aimed at broader engagement, which could result in substantial and lasting U.S. government fiscal consolidation," S&P noted. "That said, we see the path to agreement as challenging because the gap between the parties remains wide. We believe there is a significant risk that Congressional negotiations could result in no agreement on a medium-term fiscal strategy until after the fall 2012 Congressional and Presidential elections."
The Treasury Department countered by accusing S&P of underestimating the likelihood that lawmakers would reach an agreement before then.
"S&P assumes that the U.S. will enact 'a comprehensive budgetary consolidation program – combined with meaningful steps toward implementation by 2013,' but we believe S&P's negative outlook underestimates the ability of America's leaders to come together to address the difficult fiscal challenges facing the nation," said Mary Miller, Treasury's assistant secretary for financial markets.
Levin is currently traveling overseas and was unavailable to comment for this story.