The Capitol is seen at sunrise in Washington, Monday, Jan. 7, 2013
LONDON (AP) - The United States could lose its top credit rating from
a second rating agency 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 by March 1 or face a potential default. There
are fears 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
Standard & Poor's was so concerned by
the dysfunctional nature of the 2011 debate that it stripped the U.S. of
its triple A credit rating for the first time in the country's history.
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.
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 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 multi-year highs.
"The 'fiscal cliff' bullet was dodged .... (but it's) a short-term patch," said 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 avoid a government shutdown, potentially in
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 blue-chip AAA rating. The past few years, Riley
said, have been marked by "self-inflicted crises" between deadlines.
major reason behind the lack of swift action is that Democrats control
the White House and the Senate, while Republicans have a solid majority
in the House of Representatives. The parties have differing visions of
the role of government and often varying political objectives.
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.
Other factors Fitch says
support the U.S.'s AAA rating are the country's economic dynamism,
lower financial sector risks, the rule of law as well as the global
benchmark status of the country's bonds and the dollar.
says these "fundamental credit strengths are being eroded by the large,
albeit steadily declining, structural budget deficit and high and
rising public debt."