Egan Jones: ‘Fiscal Cliff’ Deal Won’t Help US Rating

“Even a compromise by Congress to avert a ‘fiscal cliff’ won’t change the troubled credit outlook of the U.S. economy, which continues to face a huge debt burden, says Sean Egan, managing director of Egan-Jones, the ratings firm that has cut America’s sovereign debt rating twice this year.

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“The key measure on sovereign credit quality is debt-to-GDP, in the case of the U.S., it’s risen rather dramatically, from four years ago at 75 percent debt-to-GDP, to currently over 104 percent,” Egan told CNBC on Tuesday.

“The problem in the U.S. is that the debt has grown whereas the GDP has not grown. (While) the U.S. has had the benefit of being the major reserve currency, that only takes it so far,” he added.

Egan-Jones first cut U.S. credit rating to AA from AA+ in April, citing concerns over a lack of progress in cutting federal debt; and again in September, to AA-, triggered by concerns the quantitative easing from the Federal Reserve would hurt the country’s credit quality.”

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