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Moody's: Recall of automatic U.S. spending cuts may harm credit rating

Nov 30, 2011 Walt Wojoiechowski

Moody's Investors Service warned the U.S government against rescinding a series of automatic spending cuts on Wednesday, asserting that such a move would put its pristine credit rating in jeopardy. The failure of the bipartisan deficit "super committee" to reach an agreement on a $1.2 trillion deficit reduction will trigger an automatic series of cuts beginning in 2013, the brunt of which will target defense spending. Consequently, a number of lawmakers are scurrying to recall the cuts in order to preserve programs aligned with their constituents. President Barack Obama, however, has promised to veto any such bill. "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 in a statement, according to Fox Business. A reduction in U.S. credit may impact investors' credit decisions and investment in treasuries. Such a situation would only prolong the economic recovery and prove the government less capable of managing its finances.