Standard & Poor's will drop the U.S.'s credit rating from its current triple-A to a D if the government misses its debt payment on August 4, Reuters' Walter Brandimarte reports. S&P's managing director John Chambers explained, "If the U.S. government misses a payment, it goes to D. ... That would happen right after August 4, when the bills mature, because they don't have a grace period." The company would downgrade Treasury bills unaffected by the blown deadline, but not as much.

The Treasury Department says that the federal debt ceiling must be raised by August 2. Two days later, the department must pay $30 billion in short-term debt. But negotiations between the White House and Congressional Republicans have broken down to the extent that some Democrats are debating whether to just declare the debt limit unconstitutional and ignore it.

Moody's has said it, too, would downgrade the U.S. if it defaults, though less severely.

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Elspeth Reeve