The United States held onto its AA+ rating from Standard & Poor’s Friday but the agency said it also kept a negative outlook on the country, citing the political deadlock over fixing the fiscal deficit.
Ten months after delivering a historic rate cut to Washington, removing its top-level AAA rating, S&P warned that the reasons for the downgrade remained in place and that if anything they were deteriorating.
The ideological deadlock between Republicans and Democrats continued to block real solutions for closing the government’s deficit and bringing down debt, S&P said.
It reiterated its August 2011 warning that if politicians do not come together to address the gaping fiscal hole and reduce debt over the medium term, the United States could be dealt another downgrade.
“The negative outlook reflects our opinion that US sovereign credit risks, primarily political and fiscal, could build to the point of leading us to lower our ‘AA+’ long-term rating by 2014.”
The US still merits a high grade, S&P said, as the issuer of the world’s key reserve currency.
“We see the US economy with an economy as highly diversified and market-oriented, with an adaptable and resilient economic structure, all of which contribute to strong credit quality.”
However, it said, the government’s ability to implement reforms “has weakened in recent years… particularly with regard to broad fiscal policy direction.”
“We think that recent shifts in the ideologies of the two major political parties in the US could raise uncertainties about the government’s ability and willingness to sustain public finances consistently over the long term.”