Fitch Ratings to US: Fix 'fiscal cliff' or risk credit downgrade
Fitch Ratings, a leading credit ratings agency, warned Wednesday that the US is likely to lose its top-notch debt rating if lawmakers cannot agree to a solution that prevents the economy from going over the 'fiscal cliff' at the end of 2012. Fitch Ratings called the resolution of the fiscal cliff and an increase in the debt ceiling 'pressing issues.'
Fitch Ratings warned on Wednesday that the U.S. was more likely to lose its top-notch "AAA" debt rating if lawmakers and President Barack Obama cannot agree on how to cut the deficit and avoid the deep government spending cuts and tax increases that automatically would go into effect next year.
But the credit ratings agency said in a report that if a deficit-cutting plan is reached, the U.S. would likely keep its "AAA" rating. Fitch would then raise its outlook to stable from negative.
"Resolution of the fiscal cliff and an increase in the debt ceiling are pressing issues that the President and Congress must address if the U.S. is to avoid a fiscal and economic crisis," the report said.
In November, Fitch Ratings said Obama must work toward a credible plan to avoid the fiscal cliff or risk the U.S. losing its "AAA"rating. Fitch changed its outlook for the U.S. rating to negative last year after Congress and the Obama administration failed to meet a deadline for a plan.
In the first-ever downgrade of U.S. government debt, Standard & Poor's last year cut its rating from "'AAA" to "AA+" after the government failed to come up with a plan to reduce the deficit.
The U.S. has never failed to meet its debt obligations. The battle over raising the debt limit in August 2011 went to the last minute before a compromise was reached.