If the rating agency’s entire argument was that the political system showed itself to be “less stable, less effective, and less predictable” during the debt limit debate, and that this failure of policymaking and institutional capability increases the chances of default, I don’t have much to argue about that. But, there’s a policy response for that. S&P could do exactly what Moody’s did and call for the debt limit to be extinguished, on the grounds that the legislative branch shouldn’t get to vote twice on funding, once when they appropriate it and another time when they decide whether or not the bill should be paid. If they really wanted to exert some influence on behalf of bondholders, they could have said that they would downgrade US debt further if the debt limit isn’t abolished within 90 days. Since the brinksmanship over the debt limit constitutes the biggest – perhaps the only – threat to paying off US sovereign debt, then the appropriate action for entities judging creditworthiness is to ask that the country in question eliminate the arcane and also dangerous practice.
But that’s not S&P’s only rationale.