Fitch Ratings said Tuesday it has placed its top rating on U.S. government's long-term debt on review for a possible downgrade, citing the drawn-out debate over raising the nation's debt limit.
"Although Fitch continues to believe that the debt ceiling will be raised soon, the political brinkmanship and reduced financing flexibility could increase the risk of a U.S. default," the ratings agency said.
The Treasury Department has said the emergency measures it has been using to manage the nation's finances under the existing debt limit will run out Thursday.
Without an increase in the nation's ability to borrow money to pay bills, "the U.S. risks being forced to incur widespread delays of payments to suppliers and employees, as well as social security payments to citizens - all of which would damage the perception of U.S. sovereign creditworthiness and the economy," Fitch said.
Fitch said it could make a decision on whether to lower its AAA rating on U.S. debt by the end of the first quarter.
"The announcement reflects the urgency with which Congress should act to remove the threat of default hanging over the economy," the Treasury Department said.
Political brinksmanship was incorporated into Standard &Poor's downgrade of the U.S. from AAA to AA+ in 2011, so far the only one of the major ratings agencies to give the U.S. less than a top rating on its debt. But the lack of an agreement on the debt limit this week would not necessarily trigger another S&P downgrade.
"Passing (Oct.) 17th is not a specific trigger in terms of a ratings change," says John Piecuch, spokesman for Standard & Poor's.
If the U.S, missed a debt payment, however, its rating would be lowered to selective default, Piechuch says.
Governments typically don't default on all their debt, as companies in bankruptcy do.
Contributing: John Waggoner