Crowds gather in the Wall Street district in New York to protest the austerity measures imposed by the capitalist system. Arrests were reported as police moved to protect the financial institutions., a photo by Pan-African News Wire File Photos on Flickr.
Fitch again warns U.S. debt burden threatens AAA rating
By Daniel Bases
NEW YORK (Reuters) - Fitch Ratings on Wednesday warned again that the United States' rising debt burden was not consistent with maintaining the country's top AAA credit rating, but said there would likely be no decision on whether to cut the rating before 2013.
Last month, Fitch changed its U.S. credit rating outlook to negative from stable, citing the failure of a special congressional committee to agree on at least $1.2 trillion in deficit-reduction measures.
"Federal debt will rise in the absence of expenditure and tax reforms that would address the challenges of rising health and social security spending as the population ages," Fitch said in a statement.
"The high and rising federal and general government debt burden is not consistent with the U.S. retaining its 'AAA' status despite its other fundamental sovereign credit strengths," the ratings agency said.
In a new fiscal projection, Fitch said at least $3.5 trillion of additional deficit reduction measures will be required to stabilize the federal debt held by the public at around 90 percent of gross domestic product in the latter half of the current decade.
Fitch, when it lowered its outlook to negative, had said it was giving the U.S. government until 2013 to come up with a "credible plan" to tackle its ballooning budget deficit or risk a downgrade from the AAA status.
"A key task of an incoming Congress and administration in 2013 is to formulate a credible plan to reduce the budget deficit and stabilize the federal debt burden. Without such a strategy, the sovereign rating will likely be lowered by the end of 2013," Fitch reiterated.
Rival ratings agency Standard & Poor's cut its credit rating on the United States to AA-plus from AAA on August 5, citing concerns over the government's budget deficit and rising debt burden as well as the political gridlock that nearly led to a default.
On November 23, Moody's Investors Service, warned that its top level Aaa credit rating for the United States could be in jeopardy if lawmakers were to backtrack on $1.2 trillion in automatic deficit cuts that are set to be made over 10 years.
The plan for automatic cuts was triggered after the special congressional committee failed to reach an agreement on deficit reduction. Moody's said any pullback from the agreed automatic cuts to take effect starting in 2013 could prompt it to take action.
(Reporting By Daniel Bases; Editing by Leslie Adler)