Washington: Rating agency Standard and Poor’s said Friday it does not expect the negotiations over the fiscal cliff to spark another downgrade of the United States, nor improve the country’s rating.
The agency said it had already accounted for the political stalemate over reducing the deficit when it cut the country’s rating from the top-level AAA to AA+ for the first time in history in August 2011, and labeled it with a “negative” outlook.
At that time, S&P cited “the political brinkmanship of recent months (that) highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable”.
“We believe that this characterization still holds,” it said in a statement Friday.
The announcement came as President Barack Obama hosted a high-level meeting in the White House in a last-ditch effort to keep the United States from going over the so-called fiscal cliff — a mix of steep spending cuts and tax hikes set to kick in next month.
Going into the Friday afternoon talks, neither the White House nor Republicans showed any sign of shifting from their entrenched positions.
S&P maintained its negative outlook on the US rating, saying that any deal cobbled together in last-minute negotiations to avoid the cliff would neither improve nor immediately worsen Washington’s medium term debt outlook.
The absence of any agreement, it said, would in fact improve the government’s fiscal position but also likely send the country back into recession.
Moreover, it said, such a deal would amount to “fiscal consolidation enacted by default” and “centered on short-term measures,” rather than a long-term bipartisan deal to reduce the deficit.
It would likely be “insufficient to place the US medium-term public finances on a sustainable footing.”
Also, it added, any likely last-minute deal would “be vulnerable to reversal, especially in the first few weeks of the new year.”