Fitch: debt-limit delay imperils U.S. credit rating

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Tuesday, January 15, 2013

Los Angeles Times: A failure by Congress to raise the debt limit "in a timely manner" could lead to a downgrade of the nation's AAA credit rating, Fitch Ratings said Tuesday.

Republicans want major government 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.

Fitch said a repeat of the bitter 2011 brinkmanship that led to a last-minute increase of the debt ceiling would trigger a formal review of the U.S. credit rating because it would raise doubts about the ability of policymakers to agree on ways to reduce the budget deficit.

But Fitch also said that the failure to come up with a plan that would reduce the long-term deficit while not damaging the economic recovery also could lead to a credit-rating downgrade.

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