The Obama Administration's "grand bargain" included $3 Trillion in budget cuts and around $800 billion in increased tax revenues substantially bigger spending cuts than ultimately were agreed upon through the final legislation. The Administration's plan would have likely satisfied the ratings agency although political 'dysfunction' initiated by the willingness of the Tea Party Republicans to push the the U.S. to the edge of default was clearly the main reason behind the credit downgrade.
“...the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges. (Standard & Poors' statement on U.S. debt downgrade)
“Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act.” (Standard & Poors' statement on U.S. debt downgrade)
How a downgrade on the national debt will impact South Carolina's fiscal future