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Treasury Dept.: Downgrade flawed by $2-Trillion error

The US Treasury Department is seen on August 5, 2011 after Standard & Poor's cut the US credit rating for the first time in history. NICHOLAS KAMM/AFP/Getty Images

The Obama administration wasted little time in firing back at Standard and Poor's history-making downgrade of U.S. debt.

Late Friday, a Treasury Dept. spokesman told CBS News' Mark Knoller that "A judgment flawed by a $2-trillion error speaks for itself."

It was the first salvo in what will likely be extensive damage control by the Obama Administration, which now goes down in history as the first presidency to have a credit downgrade occur on its watch.

S&P cited "political brinksmanship" from both parties in its downgrade.

In as statement released Friday, S&P said: "The political brinksmanship of recent months highlights what we see as America's governance and policy making becoming less stable, less effective, and less predictable than what we previously believed."

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"Republicans and Democrats have only been able to agree to relatively modest savings on discretionary spending while delegating to the Select Committee decisions on more comprehensive measures. It appears that for now, new revenues have dropped down on the menu of policy options. In addition, the plan envisions only minor policy changes on Medicare and little change in other entitlements, the containment of which we and most other independent observers regard as key to long-term fiscal sustainability."

President Obama met with Treasury Secretary Timothy Geithner on Friday before heading to Camp David for the weekend.

The credit rating agency announced Friday that it is cutting the country's top AAA rating by one notch to AA-plus. The credit agency said late Friday that it is making the move because the deficit reduction plan passed by Congress on Tuesday did not go far enough to stabilize the country's debt situation and that the policymaking is not stable or effective as needed to address the current economic challenge.
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