U.S. might get downgraded - but do rating agencies matter?

I have previously written about the how the rating agencies currently hold a dangerous level of influence over our global economy through sovereign ratings. With one press release, these agencies can cause massive selloffs and panic in the markets worldwide (see Europe). The ongoing debt crisis has focused many on the question of whether or not our debt ceiling will be raised. But there is another, equally important, matter that deserves attention: whether or not the U.S. will get downgraded. If the U.S. raises the debt ceiling, this by no means saves the country from losing its coveted AAA status. In fact, the Standard & Poor’s (S&P) Rating Agency has explicitly indicated that a plan providing for less than $4 trillion in deficit reduction over 10 years is likely to lead to a downgrade. Some commentators have cautioned that a credit downgrade, in and of itself, would be devastating. Financial analysts estimate that a downgrade would result in $100 billion more of additional interest expense for the U.S. - per year. Over 10 years, this would be an additional $1 trillion of additional interest expense incurred. It would seem logical that any plan which contemplates less than $4 trillion in deficit reduction over the next 10 years should factor this in. So the current plan of ~$2.7 trillion in deficit reduction should probably be around $1.7 trillion. But this is only true if you actually take the rating agencies to heart. Which brings up a legitimate question: why listen to the rating agencies in the first place? These are the same agencies that facilitated the real estate bubble and bust by assigning top ratings to debt instruments made up of sub-prime mortgage loans - debt instruments that are now considered "toxic." The agencies, as Thomas Beck (author of "Constitutional Separation of Powers: Cases & Commentary") points out, have long treated U.S. bonds as the gold standard by which all other debt instruments should be measured - even when they knew Washington was engaged in a colossal Ponzi-type cycle. It was able to repay its existing debt only by taking on new debt, and then pay that newer debt by taking on more debt, and so on, and so on. Beck, in his article (sourced below) goes on to ask, "Could any careful lender conclude that such behavior by a borrower warrants the highest possible credit rating?" For a country that now borrows $0.40 cents for every $1 dollar it spends, it shouldn’t take a rating agency press release to illustrate that the U.S. is not the same credit it was 10 years ago.