The US Congress is bent on resolving the tax code before the end of this year. There are consequences to their delayed attention to this matter and this is just one of them…
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Moody's Warns It May Cut US Rating if Tax-Cut Deal Becomes Law
Monday, 13 Dec 2010 11:34 AM
Moody's warned Monday that it could move a step closer to cutting the U.S. Aaa rating if President Barack Obama's tax and unemployment benefit package becomes law.
The plan agreed to by Obama and Republican leaders last week could push up debt levels, increasing the likelihood of a negative outlook on the United States rating in the coming two years, the ratings agency said.
A negative outlook, if adopted, would make a rating cut more likely over the following 12-to-18 months.
For the United States, a loss of the top AAA rating, reduce the appeal of U.S. Treasury’s, which currently rank as among the world's safest investments.
"From a credit perspective, the negative effects on government finance are likely to outweigh the positive effects of higher economic growth," Moody's analyst Steven Hess said in a report sent late on Sunday.
After Obama announced his plan, Treasury prices fell sharply in volatile trade last week and yields have hit a six-month high, in part due to concerns over the effect the package will have on government debt levels.