Unless Congress acts, the United States is at risk of another credit downgrade.
The heated debates last summer over raising the debt ceiling and cutting government spending resulted in Standard and Poor’s unprecedented move to lower America’s triple A credit rating to AA+. At the time, fellow rating agencies Moody’s and Fitch maintained their rating of U.S. credit as triple A.
Fitch Ratings may be next to downgrade the U.S. if Congress doesn’t modify its behavior, according to David Riley, the credit ratings managing director.
“In terms of the rating, they need to address this issue of tax and spending,” Riley said on Bloomberg Television earlier this week. “They need to make some decisions on that. They need to set out some kind of plan to address the deficit and debt in a sensible way.”
“We are not looking for slash and burn; we are talking about a sensible reduction,” Riley continued. “If they can’t really put that together in the first half of 2013, there is a significant threat to the loss of the triple-A rating from Fitch.”
At the end of this year, the Bush tax cuts are due to expire and across-the-board spending cuts are scheduled to take place as part of sequestration. “The nonpartisan Congressional Budget Office has already warned that the U.S. economy will contract in 2013 if it falls off ‘the cliff,’” Market Watch reports.
“The U.S. could go into a recession, potentially quite a bad recession, which is wholly avoidable and wholly unnecessary,” Riley said in his television appearance, adding that the political establishment is good at delaying difficult decisions.
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