Fitch Ratings Agency maintained the U.S.'s top rating of AAA today, but it changed its outlook on U.S. debt to "negative" and warned it may downgrade the credit rating because the Super Committee failed to reach a deal on reducing the federal deficit. Their press explains in a press release:
The Negative Outlook reflects Fitch's declining confidence that timely fiscal measures necessary to place U.S. public finances on a sustainable path and secure the U.S. 'AAA' sovereign rating will be forthcoming following failure of the Congressional Joint Select Committee on Deficit Reduction (JSCDR) to agree at least USD1.2 trillion of measures to cut the federal budget deficit over the next 10 years as mandated under the Budget Control Act passed in August (BCA 2011).
The Fitch note follows the S&P's reasoning for dropping U.S. bonds from an AAA+ rating to AA+ after Congress' debt ceiling standoff.
– The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.
– More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.
Interest rates on U.S. bonds have remained low following the S&P downgrade. Even if they are unaffected by the Fitch move, it's another slap for Congress. As the Wall Street Journal's Mark Gongloff sarcastically writes, "Congratulations again, Super Congress."
This article is from the archive of our partner The Wire.
We want to hear what you think about this article. Submit a letter to the editor or write to email@example.com.