US risks losing ‘AAA’ debt rating: Fitch

The US privileged ‘AAA’ status on government debt is at risk once again, a credit ratings agency has warned.

Fitch credit ratings agency announced on Wednesday that it would lower the top-notch rating if Congress fails to find a long-term deficit-reduction strategy.

“Resolution of the fiscal cliff and an increase in the debt ceiling are pressing issues that the President and Congress must address if the US is to avoid a fiscal and economic crisis,” the agency said.

Fitch recommended that the US include a plan to reign in tax measures while restricting the costs of Medicare and Social Security in order to contain spending.

This comes as Congress remains divided over how to resolve the issue as Democrats call for an immediate increase on the limit, while Republicans push for spending cuts ahead of raising the ceiling.

Experts warn that Congress risks slowing the economy including the loss of 750,000 jobs and key government services by allowing USD 85 billion in automatic spending cuts to be triggered on Friday.

Last year, Fitch changed its outlook for the US rating to negative amid a deadlock between Congress and the Obama administration.

Standard & Poor’s slashed its ratings from “AAA” to “AA+” last year – the first-ever downgrade of US government debt – during Washington’s battle to raise the debt ceiling. Moody’s currently has its top AAA rating under evaluation.

Debt ratings are used to set bond prices and interest rates, with credit downgrades leading to higher borrowing costs for the US over time.