If one had to pick the next 'AAA' country to lose its golden ratings, the US would be a pretty good choice.
Fitch Ratings said on Wednesday that US fiscal metrics will be the worst of any ‘AAA’?rated sovereign.
A major reason for this assessment is President Barack Obama's tax compromise with the Republicans, which will add $858 billion to public debt, which is equivalent to 5.5 percent of the gross domestic product.
Moreover, the United States has no credible medium-term fiscal consolidation strategy, said Fitch.
On the monetary side, the Federal Reserve's plan of quantitative easing -- combined with the lack of a medium-term fiscal consolidation plan -- risks undermining confidence in the US dollar and raising inflation expectations.
Fitch acknowledges that the United States has higher debt tolerance than other 'AAA' countries because of the flexibility and dynamism of its economy and the reserve currency status of the US dollar.
However, the problems of mounting debt and the perceived inability to reduce it still erodes confidence in the sustainability of public finances and can adversely impact the country's 'AAA' ratings, said Fitch.
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