US Could Face Downgrade if Debt Committee Fails

October 11 00:00 2011

New York, October 11 (RainbowNewsLine.com) – There is a lot of pressure building up on the 12 members of the debt committee who have until Nov. 23 to demonstrate they can reach across the aisle and approve at least $1.2 trillion in debt reduction. If a simple majority cannot reach a consensus or if Congress votes down the group’s proposals in December, the U.S. sovereign credit rating would be in grave danger of being downgraded.

The three major credit rating agencies have put the spotlight on Congress after the debt-ceiling nightmare this summer. Standard & Poor’s had downgraded the United States’ AAA rating to AA+ because lawmakers were willing to risk default to extract concessions on budget cuts. It was seen as a political downgrade.

S&P has warned that it would downgrade the country again if at least $1.2 trillion in deficit reduction is not implemented on top of the initial round of cuts called for by the debt ceiling deal. Moody’s had affirmed the AAA rating but revised it to negative. It says that if the super committee process proves “ineffective, this could affect the rating negatively.”

Fitch still maintains a stable outlook on AAA rating. However, it said that failure by the committee to reach agreement on at least $1.2 trillion could hurt the rating.

Budget experts say that even if the committee agrees upon $1.2 trillion, it still matters how it gets there.

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