The damage is already done to Product USA

Credit ratings agencies may not wait for a default to downgrade the US government's creditworthiness.

Standard & Poor's downgraded US government bonds to AA from AAA amid the August 2011 debt ceiling debacle. The other two major ratings agencies - Moody's Investors Service and Fitch Ratings - didn't follow suit at the time, but Fitch said late on Tuesday that it had put the United States on a watch list, meaning US bonds might be downgraded.

Fitch promised to resolve the status before the end of March, depending on the outcome of the political squabbling, which could extend into next year even with a short-term resolution now. And S&P does not rule out a downgrade.

For now, it's a warning that politicians are showing just why US bonds no longer are considered to be worthy of the gold-plated AAA status. The AA designation means that US bonds are now considered a riskier investment than those issued by Canada or Germany.

S&P spokesman John Piecuch said it was "worth reiterating that this level of discord, which is not consistent with a AAA rating, is a dominant reason the US sovereign rating is no longer rated AAA".

Financial markets weren't waiting for the downgrade, which reflects a greater risk of default and might push interest rates up.