A market plunge after Standard & Poor's downgraded the U.S. debt rating has local economists and business people worried about a lack of leadership in Washington and the likelihood of another recession.

"The risks of an economic downturn have increased," said Don Klepper-Smith, chief economist of New Haven-based DataCore Partners.

Klepper-Smith, a former chief adviser for the Governor's Council of Economists, in part, blames a dysfunctional U.S. government.

Last week, President Barack Obama signed into law a highly criticized bill to increase the debt ceiling. That was followed by several down days in the market, capped by a Friday evening decision by Standard & Poor's to downgrade the federal government's credit rating to AA+ from AAA.

Peter Schiff, who runs Westport-based brokerage firm Euro Pacific Capital, applauded S&P's move.

"They should have downgraded lower," Schiff said. "I think double-A-plus is too generous."

On Monday, the S&P 500 tumbled 80 points, or 6.7 percent, to 1,119; the Dow Jones Industrial Average plummeted 635 points to 10,810 and the Nasdaq Composite was off 6.9 percent closing at 2,358, a 175-point loss.

Schiff, a frequent guest on CNBC and Fox Business Network, was surprised to see U.S. Treasury bonds rally while stocks took a nosedive.

"I think everyone is trying to prop up the U.S. bond market to prevent it from collapsing," said Schiff, who ran for U.S. Senate unsuccessfully in 2010.

The market reaction is a symptom of bigger problems with the economy, said Klepper-Smith and Nicolas Perna, a Yale University professor and economic adviser to Webster Bank said.

"(S&P) was dead on with their analysis," Klepper-Smith said. "This is an indictment of the entire congressional process."

While Washington argued and postured, he said, the economy continued to struggle and on Friday, the Department of Labor announced the average duration of unemployment is 40 weeks, an increase from a maximum of 25 weeks, he said.

Perna said the market reaction has more to do with the slowing economy and how poorly Washington handled the debt limit debate. Growth in job creation and Gross Domestic Product have been small, while consumer spending is weak.

Economists and other professionals are looking at the government and not seeing much reason to be confident that something can be done to help the economy.

Klepper-Smith noted that in the 1987 crash, the Fed Funds rate, the amount the Federal Reserve charges banks, was 7.24 percent. Today, the Fed Funds rate is 0.25 percent. That leaves little room to adjust rates going forward, and is why most people are betting the Fed will leave the rate unchanged on Tuesday afternoon.

Milanno Uk`haxhaj, a co-owner of the Gaetano's markets in Stratford and Monroe, said he doesn't hear much uncertainty about the economy in the smaller lines he sees in the deli.

"You hear the stories in the deli every day," Uk'haxhaj said. "I say, `Hey, long time no see.' And they tell me, `Yeah, I lost my job of 20 years...' They no have money to spend.'"

Uk'haxhaj said the last year has been the worst in his 20 years of being in business. He's working 14 hours or longer a day, because sales won't support more employees.

At R.C. Bigelow Inc. in Fairfield, Chief Financial Officer Don Janezic said his company of 350 employees has weathered the tough economy of the last few years well as tea has proven to be recession proof.

He said as the economy slows, the company's concern is for its employees' retirement, which is tied to the equity markets, and for Bigelow's borrowing and supply costs, which might increase.

He said the downgrade was a clear message to the federal government to get its act together.

As for jobs, he said Bigelow is stable, though he wondered whether some suppliers may be forced to shed positions.

Jobs growth, the housing market and equities are three key areas of wealth creation in the U.S., and right now all three are in trouble, which is crimping consumer spending.

He said Congress should heed the words of a president who faced a far more serious challenge and get on the same page.

"It was (Abraham) Lincoln who said, `A house divided cannot stand.' "

Staff Writer Neil Vigdor contributed to this report.