The United States has lost its final stable outlook from the three largest credit-rating companies after Fitch Ratings lowered its outlook to a negative U.S. credit rating. The credit rating agency recently announced it had lowered the outlook after a congressional debt committee failed to agree on deficit cuts last week.
Debt Committee Failure Lead to Poor U.S. Credit Rating Outlook
Fitch revealed on Monday that it believes, much like Standard & Poor’s and Moody’s, lawmakers are not willing or able to work together for the benefit of the nation.
After an announcement declaring that the 12-member bipartisan committee, which was formed in August to reduce the national debt by at least $1.2 trillion, could not agree on ways to alleviate the deficit, the ratings agency said its fear of lacking bipartisan efforts were confirmed.
In a statement issued yesterday, Fitch said it was downgrading the U.S. credit rating outlook to negative due to ”declining confidence that timely fiscal measures necessary to place U.S. public finances on a sustainable path will be forthcoming.”
Probability of U.S. Credit Downgrade Higher than 50 Percent
After the debt committee’s recent failure and Congress’ near inability to avoid a sovereign debt default in August, critics have expressed that lawmakers simply seem more interested in playing political games to gain favor at election time than helping the nation recover from a suffering economy in the present. This sentiment is largely what led to Standard & Poor’s U.S. credit downgrade to an AA+ in August.
According to Fitch, the declining confidence in lawmakers’ willingness to make decisions to help the country means that the agency will likely downgrade the nation’s rating over the next two years. While the outlook has been lowered, the actual rating hasn’t been downgraded yet, though the probability of this happening is greater than 50 percent.
Currently, the nation’s rating with the agency is AAA. Fitch says that a U.S. credit rating downgrade may be avoidable, if Congress is able to agree on a “credible deficit reduction plan.”
However, the rating agency warned that “[f]urther deficit reduction will not be credible if it relies solely on further cuts in discretionary spending rather than reform to entitlements and taxation.” Moving forward it doesn’t seem likely that short-term repairs will be good enough for ratings agencies like Fitch– instead– a well-rounded national debt plan will be necessary in order to maintain the integrity of the U.S. credit rating.
