The party’s over.
A day after the election, the major credit ratings firms reminded Washington that it needs to get the nation’s fiscal house in order.
In a gloomy report titled “No Fiscal Honeymoon,” Fitch Ratings warned the country is facing a downgrade in 2013 unless it avoids the “fiscal cliff” and raises the debt ceiling.
Fitch said it would cut the US’s AAA rating by a notch unless President Obama and a divided Congress break through the political gridlock and strike a realistic budget pact by the end of the year.
The ratings firm, which has a negative outlook on the US, said a credible plan must include tax increases and spending cuts.
Politicians were also scolded for patching together clumsy stop-gap measures that automatically — and almost blindly — make ill-advised cuts in about $600 billion of spending while levying new taxes harmful to the delicate US recovery.
Moody’s Investors Service also has placed Uncle Sam on fiscal probation with a negative outlook but is holding off stripping it of its highest rating.
The ratings rival said it would “await evidence that the economy could rebound from the shock” of falling off the fiscal cliff before it cuts the credit rating.
Another downgrade could cause a sharp hike in the government’s borrowing costs from investors and other nations, while stripping the US of its title as the safest bet in the world.
Standard & Poor’s late last year hammered the government with its first-ever cut to its gold-plated AAA rating by a notch. S&P also is waiting to see if a deal can be struck before knocking the rate down another notch.