All three major rating agencies – Standard & Poor's, Moody's Investors Service and Fitch Ratings – have warned that the US could lose its prime triple-A rating for the first time since In 2011 if the battle over the so-called fiscal cliff is not resolved.
All three agencies have said since Election Day that they are following closely the negotiations over the ''fiscal cliff,'' and whether the US retains its top AAA rating from two out of the three or gets downgraded further depends on the White House and congressional leaders pushing through a major budget deal with $4 trillion or more in savings to stabilise the debt.
"The rating is in the hands of policymakers," said John Chambers, chairman of Standard & Poor's sovereign rating committee, the agency that downgraded the United States in August 2011.
In interviews since the election, all three major rating agencies said cutting the US debt rating is highly likely if next year's budget process replays 2011's debt ceiling debacle or if the seemingly simple goal of cutting deficits goes unmet.
President Obama and House Speaker John A Boehner, an Ohio Republican, have pledged to work toward forging a budget deal, but they remain far apart on the mix of tax increases and spending reforms needed to get there.
Obama insists he has a mandate to allow the tax rate on top earners to revert to 1990s levels at the end of the year, while Boehner says conservative Republicans will defeat higher tax rates in the House. The two sides also are severely divided on how to reform Medicare, Medicaid and other entitlement programmes to bring down costs as the nation's population ages.
Any ratings cut by a second Wall Street agency after last year's first-ever downgrade of the US rating by Standard & Poor's Corp has the potential to disrupt financial markets even more than the first downgrade, analysts say, because it would render US Treasury securities ineligible to be included in some investment funds that are required to maintain an average AAA rating on their holdings.