Tags: Fitch | US | rating | Downgrade

Fitch: US Faces 2013 AAA Downgrade Unless Deficit Cuts Made

Thursday, 22 Dec 2011 06:57 AM

 

  Comment  |
   Contact  |
  Print   |
    A   A  
  Copy Shortlink

The U.S.’s AAA rating will probably be cut by Fitch Ratings by the end of 2013 unless lawmakers are able to formulate a plan to reduce the budget deficit after next year’s congressional and presidential elections.

“Without such a strategy, the sovereign rating will likely be lowered,” New York-based Fitch said in a statement. “Agreement will also have to be reached on raising the federal debt ceiling, which is expected to become binding in the first half of 2013.”

Fitch assigned a negative outlook on the U.S. in November after a congressional committee failed to agree on cuts.
_________________________________________________________

The ‘Unthinkable’ Could Happen — Wall Street Journal
Over one million Americans have heard the evidence for 50% unemployment, 90% stock market crash, and 100% inflation. Be prepared. Watch the Aftershock Survival Summit Now, See the Evidence.

_________________________________________________________

Fitch said its fiscal and economic projections imply that federal debt held by the public will exceed 90 percent of gross domestic product by the end of the decade in the absence of expenditure and tax reforms that would address the challenges of rising health and Social Security spending as the population ages.

The high and rising federal and general government debt burden isn’t consistent with the U.S. retaining its AAA status even with its other fundamental sovereign credit strengths, Fitch said.

“The debt situation is a slow moving train wreck,” said Jason Brady, a managing director at Thornburg Investment Management Inc., which oversees about $73 billion from Santa Fe, New Mexico. “The risks are apparent, but the benefits or strengths are also apparent. The strength of the U.S economy, the strength of the U.S financial system, is more apparent right now.”

The U.S.’s probability of a downgrade is greater than 50 percent over two years, Fitch said Nov. 28 in a statement. Standard & Poor’s and Moody’s Investors Service said Nov. 21 that the so-called supercommittee’s inability to reach an agreement didn’t merit downgrades because the inaction will trigger $1.2 trillion in automatic spending cuts.

Treasuries have returned 4.1 percent since the S&P cut the U.S. to AA+ from AAA on Aug. 5, according to Bank of America Merrill Lynch index data.

The 12-member bipartisan committee, created in August by the Budget Control Act that raised the U.S. debt ceiling, reached an impasse amid Democrats’ opposition to reductions in programs such as Medicare and Republicans’ reluctance to increases in tax revenue.


© Copyright 2014 Bloomberg News. All rights reserved.

  Comment  |
   Contact  |
  Print   |
  Copy Shortlink
Around the Web

Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 

You May Also Like
Around the Web

Most Commented

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved