By Martin Crutsinger, AP
WASHINGTON– Fitch said Monday that it will keep its rating for long-term U.S. debt at the top AAA level, despite a congressional panel’s failure to agree on long-term deficit cuts. But it is lowering its outlook to negative.
The rating agency said it has less confidence in the federal government’s ability to take the necessary steps to rein in the deficit.
A special congressional panel failed last week to reach agreement on US$1.2 trillion in deficit cuts over the next decade. The impasse triggered automatic cuts of the same amount, which are scheduled to kick in beginning in 2013.
Moody’s Investors Services and Standard & Poor’s (S&P) also left their ratings unchanged last week. But Moody’s threatened to lower its rating if Congress backed off the automatic cuts.
S&P downgraded long-term U.S. debt in August to the second-highest level, AA-plus, and switched its outlook to negative. It was the first time the credit rating agency had lowered the nation’s AAA rating since granting it in 1917.
Fitch, Moody’s and S&P, the three major rating agencies, assess the creditworthiness of debt issued by countries, corporations and municipalities. Ratings are based on the likelihood of default. The AAA rating is the highest available and signifies an extremely low likelihood of default.
S&P’s downgrade came days after Congress barely resolved a prolonged fight over raising the nation’s borrowing limit to avoid a potential default on the nation’s debt. U.S. lawmakers ultimately agreed to spending cuts that would reduce the debt by more than US$2 trillion. They left much of the details to the newly created “super committee,” which had until Nov. 21 to agree on US$1.2 trillion in cuts. In August, S&P appeared to cast doubt on the committee’s ability to meet that goal. It said it lowered the U.S. credit rating because of politics that slowed the debt limit increase and not because it thought the U.S. couldn’t pay its bills.
S&P then said that it was “pessimistic about the capacity of Congress and the administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government’s debt dynamics anytime soon.”