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Ratings agency issues post-election warning

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Fitch writes that “failure to reach even a temporary arrangement to prevent the full range of tax increases and spending cuts implied by the fiscal cliff and a repeat of the August 2011 debt-ceiling episode would mean that the general election had not resolved the political gridlock in Washington and likely result in a sovereign rating downgrade by Fitch.”

It says that resolving these matters would allow Fitch to possibly take its “negative outlook” off of the gold-plated AAA rating by the end of next year. A downgrade would otherwise come before late 2013, it said. 

The thorniest issue of the fiscal cliff remains what to do with the Bush-era tax rates. Obama has refused to entertain renewing the tax breaks for higher earners, and House Speaker John BoehnerJohn Andrew BoehnerRestoring fiscal sanity requires bipartisan courage GOP congressman slams primary rival for Ryan donations Speculation swirls about Kevin McCarthy’s future MORE (R-Ohio) is moving swiftly to define the election as not being a “mandate” to raise taxes as part of any deal.