U.S. faces Moody’s downgrade if budget talks fail

U.S. faces Moody’s downgrade if budget talks fail

Moody’s Investors Service says it would likely cut its “Aaa” rating on U.S. government debt, probably by one notch, if federal budget negotiations fail.

If the highly partisan Congress does not reach a budget deal, more than $600 billion in spending cuts and tax increases will kick in next year, a scenario that’s been called the “fiscal cliff” because it is likely to send the U.S. economy back into recession and drive unemployment up.

Moody’s says it is difficult to predict when Congress will reach a deal, and it will likely keep its current rating and “negative” outlook until the outcome of talks is clear.

The ratings agency is also watching talks on increasing the nation’s debt limit.