Sponsored by: Investment Center

Something new in your business?  Click here to submit your business press release

Chamber Corner | Main Street News | Job Hunt | Classifieds | Calendar | Illinois Lottery 

Fitch warns it may downgrade US over debt standoff

Send a link to a friend

[January 15, 2013]  LONDON (AP) -- The United States could lose its top credit rating for the second time if there's a delay in raising the country's debt ceiling, Fitch Ratings warned Tuesday.

Congress has to increase the country's debt limit, which effectively rules how much debt the U.S. can have, by March 1 or face a potential default. There are fears that the debate will descend into the sort of squabbling and political brinkmanship that marked the last effort to raise the ceiling in the summer of 2011. The U.S. Treasury Department warned then that it had nearly reached a point where it would be unable "to meet our commitments securely."

Standard & Poor's was so concerned by the dysfunctional nature of the 2011 debate that it stripped the U.S. of its triple A rating for the first time in the country's history.

"The pressure on the U.S. rating, if anything, is increasing," said David Riley, managing director of Fitch Ratings' global sovereigns division. "We thought the 2011 crisis was a one-off event .... if we have a repeat, we will place the U.S. rating under review."

Fitch already has a negative outlook on the U.S. and has said it will make a decision on the rating this year, regardless of how the debt ceiling discussions pan out. The U.S. government reached its statutory debt limit of nearly $16.4 trillion at the end of 2012 but has engineered extraordinary measures that should see it through February.

Riley's comments come just two weeks after U.S. lawmakers agreed a budget deal with the White House that avoided the so-called "fiscal cliff" of automatic tax increases and spending cuts that many economists thought could plunge the U.S. economy, the world's largest, back into recession. Relief that a deal was cobbled together, albeit at the final hour, is one of the reasons why sentiment in the financial markets has been buoyant in the first trading days of the new year. Many stock indexes around the world are trading at multiyear highs.

"The 'fiscal cliff' bullet was dodged .... (but it's) a short-term patch," said Riley.

Riley warned that the different arms of the U.S. government still have a number of issues to address. As well as increasing the debt ceiling, they have to agree to spending cuts that were delayed as part of the "fiscal cliff" agreement and back measures to avoid a government shutdown, potentially in March.

[to top of second column]

Though short-term fixes are more likely than not, Riley said the U.S. political environment is not as good as it should be for a country holding the gold-chip AAA rating. The past few years, Riley said, have been marked by "self-inflicted crises" between deadlines.

The major reason behind the lack of swift action in the U.S. is that the Democrats control the White House and the Senate, while the Republicans have a solid majority in the House of Representatives. Both sides have differing visions of the role of the state in society and often varying political objectives.

Despite his cautious tone on the rating, Riley said the U.S. has a number of huge advantages and that getting the country's public finances into shape will not require the same level of austerity that many countries in Europe have had to enact over the past few years, partly because the U.S. economy is growing at a steady rate.

[Associated Press; By PAN PYLAS]

Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

< Recent articles

Back to top


 

News | Sports | Business | Rural Review | Teaching & Learning | Home and Family | Tourism | Obituaries

Community | Perspectives | Law & Courts | Leisure Time | Spiritual Life | Health & Fitness | Teen Scene
Calendar | Letters to the Editor