Moody's Investors Service is worried the extension of U.S. tax cuts agreed by President Barack Obama and Republican leaders could become permanent, hurting U.S. finances and its credit ratings in the long run.
Steven Hess, Moody's lead sovereign analyst for the United States, said on Tuesday doesn't foresee any change in the U.S. AAA ratings in the next 18 months to two years. He is, however, concerned about "what's going to happen in two years," when the extensions are set to expire again.
"The timing two years from now will be very complicated from a political point of view, with presidential elections in November 2012," Hess told Reuters in an interview.
"So we don't know if this is going to be extended again, or partially extended again," he said, noting that the tax cuts, while expected to provide an immediate "growth uptick", will hurt the country's fiscal position in the long run.
"We have long term concerns about the (U.S. credit) outlook and they are not yet being addressed. We're waiting to see if they're going to be addressed in the next couple of years," Hess said.
The White House on Tuesday defended the proposed tax deal championed by Obama, saying the extension of all Bush-era tax cuts over two years would not worsen the medium- and longer-term U.S. deficit.
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