S&P says U.S. to avoid "fiscal cliff", risks remain

Fri Jun 8, 2012 6:09pm EDT
 
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By Daniel Bases

NEW YORK (Reuters) - Standard & Poor's said on Friday it expects U.S. lawmakers to set aside their differences to prevent a combination of tax hikes and spending cuts from hurting the economy in early 2013.

The rating agency affirmed the AA-plus rating of the world's biggest economy but cautioned that its outlook remains negative.

The affirmation of the rating restarts the six- to 24-month period in which the agency could again cut the U.S. rating.

"One thing we do expect Republicans and Democrats to agree on -- given an unemployment rate of about 8 percent and continued risks to the U.S. economic recovery -- is avoiding sudden fiscal adjustment," the agency said in a statement.

The United States lost its top-tier AAA credit rating from Standard & Poor's last August in the wake of a bruising fight in Congress over lifting the government's debt limit.

"We expect that a sudden fiscal adjustment could occur if all current tax and spending provisions, set to either expire or take effect near the end of 2012, go forward in accordance with current law," S&P said on Friday.

Bush-era tax cuts are to expire on December 31, deep, automatic spending cuts roll out on January 1, 2013, and U.S. borrowing authority must be raised early in the year to avoid the risk of default.

The slate of measures to be faced by a lame duck session of Congress has been dubbed the "fiscal cliff."   Continued...