Fitch Says Obama Needs to Quickly Secure Fiscal Cliff Agreement
11/07 06:18 AM
Newly re-elected U.S. President Barack Obama needs to move quickly to avoid the fiscal cliff that is threatening the country's economic recovery and its prized triple-A rating, Fitch Ratings said in a report Wednesday.
The rating company reiterated that failing to address the fiscal cliff--a combination of major spending cuts and tax increases that will automatically take effect early next year unless politicians reach a compromise--and its debt ceiling would likely result in a credit rating downgrade in 2013.
"Failure to avoid the fiscal cliff and raise the debt ceiling in a timely manner, as well as securing agreement on credible deficit reduction, would likely result in a rating downgrade in 2013," Fitch said.
"The challenge facing President Obama and Congress is to address head-on the hard choices on tax and spending," Fitch said. These issues need to be addressed "in the coming weeks if the U.S. is to avoid a fiscal and economic crisis," it said.
Fitch estimated that the fiscal cliff would tip the U.S. economy into an avoidable recession and result in an increase in the unemployment rate to above 10% in 2013.
Fitch said it expects to resolve the negative outlook on the U.S. rating in late 2013 should politicians come to an agreement.
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