Moody’s threatens to downgrade US

Moody’s website (AFP Photo / Joel Saget)

As the budget deficit tops $1 trillion for the fourth time, the US might lose its top triple-A debt rating unless it finds a way to decrease the debt, according to Moody’s Investors Service.

If next year’s budget negotiations fail to produce policies that would reduce the deficit, Moody’s would likely lower the rating to Aa1, which is one step below the current Aaa rating. If resulting policies would stabilize or decrease the debt, then Moody expects to keep the current rating as it is.

The Congressional Budget Office (CBO) on Monday said that the government ran a $192 billion deficit in the worst August on record, which brings the federal government to a $1.17 trillion deficit for the fiscal year 2012.

While the deficit is slightly lower than last year’s, the CBO predicts that the government will face another trillion-dollar shortfall next year.

Last year, rival rating agency Standard & Poor’s downgraded the US from its top rating after lawmakers failed to agree on a deficit reduction plan. While on the verge of a government shutdown due to passionate disagreements between Democrats and Republicans, both the US dollar value and the debt rating went down while the Euro was on its four-month high.

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