Putting U.S. debt downgrade in perspective

Though Standard & Poor's downgraded the credit rating of the United States for the first time Friday, from the top AAA rating to AA-plus, two financial journalists agree the effect on financial markets will likely be short-lived.

On "The Early Show on Saturday Morning," Fortune magazine Assistant Managing Editor Leigh Gallagher told co-anchor Jeff Glor "you could say" the move was more "political" than economic.

"There's so much politics behind this." Gallagher explained, "politics in the sense that the main reason S&P did this is because of our inability to get things done. Literally, the wording in the press release when they issued the downgrade was our ability to make policy has been weakened.

Read: S&P downgrades U.S. debt

"So, this is not about us not being able to pay our debt. The U.S. will always be able to pay our debt. We can print money. So, it's not about that. It's about this brinksmanship that has led us to a point where we can't get anything done and that's had this impact on our credit rating."

Special Section: America's debt battle

Wall Street Journal "Markets" columnist Kelly Evans pointed out that, "S&P actually had telegraphed that this was coming. They said, 'Look, if we don't get, for example, a $4 trillion reduction in the U.S. deficit projection over the next decade, we're probably going to go ahead with this downgrade, regardless of whether the debt ceiling itself is actually raised.' So, people on Wall Street have more or less known this was coming.

"And this is just one of three credit rating agencies. And I think it's important for retail investors to keep in mind that, while there might be some short-term reaction, while we might see some disruption to money market funds, we'll get more bad news on Monday as related securities are downgraded, it's not expected to have necessarily a long-term effect.

"And remember, rates on U.S. government debt, which are supposed to be the big thing where we see this play out, have been sinking rapidly over the last couple of weeks. We're paying 2.5 percent for ten years. That's hardly a sign that people are expecting those costs to suddenly skyrocket."

"We're AA-plus," Gallagher noted. "I think the expectation was that we were going to go to just AA. So, we're one notch ahead of what people expected. But the outlook is negative. And ... whatever the mechanics are, the pure psychological effect of this, after the two days in the market, with Thursday's 500-point drop, Friday's wild ride, things are very prone to skittishness."

"We will see some impact on markets," Evans predicted. "Investors can't really say what it's going to be, but I expect it to be more of a short-term move. You can look back to other countries, like Japan, like Australia, that have lost their AAA rating, and it hasn't really been a game-charger. You could argue that they're telling us something we've already knew."

There was also discussion about whether S&P was simply trying to make up for the mistake all three big credit rating agencies made before the financial crisis began by overrating many types of Wall Street securities, and about whether the other two big agencies, Moody's and Fitch, will piggyback S&P's move.

To see the entire interview, click on the video ant the top of this story.