CNNMoney: Credit Rating Agencies Look the Other Way — For Now

Wednesday, 02 Jan 2013 11:17 AM

By John Morgan

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The United States may have bought some time in avoiding another credit downgrade with the fiscal cliff deal, but the major ratings agencies are keeping a close watch on what happens next in government debt talks.

The big credit agencies will probably not pass judgment until they get more visibility on the U.S. debt ceiling and longer-term plans to reduce borrowing, CNNMoney predicted.

Standard & Poor’s late last month repeated a warning that the U.S. could face another downgrade by 2014 — or sooner — if Congress does not find a solution for reducing the national debt.

Editor's Note:
'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.

The new agreement between the White House and Congress raised taxes on the wealthiest Americans, but does not address the $16.4 trillion debt ceiling, which was hit on Monday, according to CNNMoney. As a stopgap, the Treasury Department said it will use “extraordinary measures” to borrow $200 billion, giving lawmakers about two months to raise the official limit.

S&P took away the nation’s treasured AAA credit rating after Congress last raised the debt ceiling in 2011.

Fitch and Moody’s kept their AAA designations in place, but have subsequently warned of the risk of downgrades.

In a global sovereign outlook, Fitch said, “Failure to reach even a temporary arrangement to prevent the full range of tax increases and spending cuts implied by the fiscal cliff and a repeat of the August 2011 debt ceiling episode would indicate that the general election had not resolved the political gridlock in Washington and would probably result in a sovereign rating downgrade.”

The Associated Press reported another standoff between the Obama administration and Congressional Republicans is likely to arrive as early as February.

House Republicans, who fought the latest fiscal deal Tuesday before finally voting to approve it, probably won’t agree to raise the debt limit again without offsetting spending cuts that Democrats are bound to resist.

The deal will add nearly $4 trillion over a decade to federal deficits, according to the Congressional Budget Office, assuming taxes would otherwise have risen on taxpayers at all income levels rather than just those with incomes over $400,000, the AP reported.

“I’m embarrassed for this generation. Future generations deserve better,” complained Rep. Louie Gohmert, R-Texas.

Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.

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