Debt ceiling could hurt U.S. credit rating

The federal Bureau of Economic Analysis reported its

The federal Bureau of Economic Analysis reported its gross domestic product for the New York region rose 0.8 percent in 2011 to $1.28 trillion compared with a year earlier. Photo Credit: iStock

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The United States could lose its top credit rating for the second time from a leading agency if there's a delay in raising the country's debt ceiling, Fitch Ratings warned yesterday.

Congress has to increase the country's debt limit, which effectively rules how much debt the United States can have, by the end of February or face a potential default, Fitch says.

There are fears that the debate will descend into the squabbling and political brinkmanship that marked the last effort to raise the ceiling in the summer of 2011.

"The pressure on the U.S. rating, if anything, is increasing," David Riley, managing director of Fitch Ratings' global sovereigns division, said at a London conference. "We thought the 2011 crisis was a one-off event . . . if we have a repeat we will place the U.S. rating under review."

If that happens, Riley said, there was "a material risk" of the rating coming down, which could mean the United States would face steeper costs when it comes to servicing its debt.

Republicans want major spending cuts in exchange for a debt-limit increase. But Fitch, one of three major credit-rating companies, said the debt ceiling should not be used to force a deficit-reduction plan. "In Fitch's opinion, the debt ceiling is an ineffective and potentially dangerous mechanism for enforcing fiscal discipline," the company said.

Standard & Poor's was so concerned by the dysfunctional nature of the 2011 debate that it stripped the United States of its triple-A rating for the first time in the country's history.

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Another major ratings agency, Moody's, also has a negative view on the U.S. outlook.

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