BUSINESS
11/23/2011 11:32 am ET

Moody's Warns United States Must Stay Serious About Deficit Reduction

NEW YORK - Moody's Investors Service on Wednesday warned that its top credit rating for the United States could be in jeopardy if lawmakers backtrack on $1.2 trillion in deficit cuts planned over 10 years.

The ratings firm said the failure of a U.S. congressional committee to reach an agreement on deficit reduction did not affect the Aaa rating, but any pullback from agreed automatic cuts to take effect starting in 2013 could prompt it to take action.

"While a change in the composition of the spending cuts would not be a major rating consideration, a reduction in the total amount that would increase the projected increase in federal debt over the coming decade could have negative rating implications," Moody's said in a statement.

On Monday, the 12-member congressional committee, split evenly between Democrats and Republicans, abandoned its effort to reach a deal, with both sides blaming the other for the impasse.

"Although the committee could have proposed considerably more than $1.2 trillion in deficit reduction measures, which would have been positive for the government's credit-worthiness, its failure to do so does not decrease the amount of deficit reduction already legislated," Moody's said.

(Reporting by Daniel Bases and Caryn Trokie; Editing by Dan Grebler)

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