Fiscal cliff: US urged to tackle budget deficit

Despite the recent agreement, agencies are worried about the ongoing difficulty of reaching budget deals

US politicians have been urged to do more to sort out the budget by the two largest credit rating agencies.

The warning comes despite the US narrowly agreeing a deal to stave off the US "fiscal cliff" of spending cuts and tax rises worth $600bn (£370bn).
Rating agency Moody's said lawmakers would need to take additional steps to lower the ballooning budget deficit.
Rival agency Standard and Poor's added: "Washington's governance and policymaking had become less stable."
The deficit has topped $1tn in each of the past four years. Moody's said that if it failed to cut the deficit, the government's top credit rating could be at risk.
The fiscal cliff measures - $536bn of tax rises and $109bn of spending cuts - had been due to come into effect at midnight on Monday, but Congress agreed a deal to avoid the worst of the measures late on Tuesday.
Shares across the world rallied on Wednesday in response to the deal.
However, the deal postponed the hardest decisions that Republican and Democratic politicians must agree on - spending cuts and dealing with the statutory limit on how much the government can borrow, the so-called debt ceiling.
The total amount of debt that the government can borrow is currently set at $16.4tn and the government is set to run out of money in the next two months if this limit is not raised by Congress.
During the last stalemate over the debt ceiling in the summer of 2011, S&P downgraded the country's top-notch AAA credit rating to AA+ for the first time.
S&P said on Wednesday that governance and policymaking in the US had become, "less stable, less effective and less predictable. We believe that this characterisation still holds."
Moody's has a negative outlook on US government debt, a warning of a possible downgrade.

* The payroll tax was cut by 2% two years ago to stimulate the economy ** The federal Emergency Unemployment Compensation program, which pays recipients while they search for a job, was due to end *** The “doc fix” is short term funding for Medicare providers to ensure salaries remain stable

Posted in: World business