By Peter Schroeder - 11/28/11 09:33 PM EST
A credit rating agency announced Monday that it was assigning a negative outlook to the nation's top rating, citing "declining confidence" in the ability of policymakers to make major cuts to the deficit.
If the government fails to take major steps to fix the government's finances by 2013, the nation's AAA rating could be endangered, Fitch Ratings said Monday.
Fitch noted that if lawmakers adopt a "credible, medium-term deficit reduction plan," sometime in 2013, it would relieve "downward pressure" on the nation's credit rating. But if no such reforms come about, and the nation's economy takes a turn for the worse, the likely result would be another downgrade for the U.S.'s once-sterling credit reputation.
While Fitch now sees a slightly greater than 50 percent chance it will downgrade the U.S. sometime in the next two years, it maintained that the nation's economy still enjoys strong fundamentals and other unique perks even when compared to other top nations, including "unparalleled financing flexibility" and the dollar's status as the world's reserve currency.
It added that it expects America's economic recovery will pick up steam in the latter half of 2012, but noted that "considerable uncertainty" remains.
Fellow rater Standard & Poor's issued the first-ever downgrade of the nation's credit rating shortly after Congress finally reached a hard-fought agreement to raise the federal debt limit, citing increased political brinksmanship as a primary cause. It reaffirmed that AA+ rating following the supercommittee's failure, but Moody's Investors Service announced the nation's credit rating was "unaffected" by the dissolution.