Think of it as the country’s FICO score. Just like anyone who carries more debt than he can handle, the U.S. has received a warning from the nation’s top two credit rating agencies that its credit rating could go down if it doesn’t do something to correct a deteriorating financial situation.

If and when that happens it will cost the country more to borrow the same as it does with anyone who's FICO score goes down. 

Ratings warnings

In a report issued this week, Moody's Investors Service says the U.S. will need to reverse an upward trajectory in its debt ratios in order to keep its triple “A” rating (AAA).

At the same time, Standard and Poor’s, which also gives the U.S. a AAA rating, said it would not rule out changing the outlook for its U.S. sovereign debt rating because of the recent deterioration of the country's fiscal situation.

Sarah Carlson, senior analyst at Moody's, in an interview with Dow Jones Newswires, said “We have become increasingly clear about the fact that if there are not offsetting measures to reverse the deterioration in negative fundamentals in the U.S., the likelihood of a negative outlook over the next two years will increase."  

Carol Sirou, who heads S&P France, told a Paris conference, that the view of markets is that the U.S. will continue to “benefit from the exorbitant privilege linked to the U.S. dollar" to fund its deficits. She added that may change. According to Sirou, the jobless nature of the U.S. recovery was one of the biggest threats to the U.S. economy and that no AAA rating is forever.

Cost Containment

Moody's said the U.S., Germany, France and the U.K. still have debt metrics, including debt affordability -- the ratio of interest payments to revenue -- compatible with their AAA ratings at the agency. But all four countries must bring the future costs arising from pension and healthcare subsidies under control if they are to maintain long-term stability in their debt burden credit metrics.

In its regular AAA Sovereign Monitor report, Moody’s noted that measures were recommended by the U.S. National Commission on Fiscal Responsibility and Reform, appointed by President Obama, to achieve a balanced primary budget by 2015, but that there was insufficient support to trigger consideration of those recommendations by the full Congress.

Moody’s said those recommendations included a wide variety of measures, including Social Security reform, cutbacks in the growth of Medicare outlays, elimination or modification of the mortgage interest tax deduction, a gasoline tax and other measures. But in Moody's view, it is unlikely that the Commission's recommendations will be adopted.

The most recent official figures show the ratio of federal debt to revenue averaging 397 percent of gross domestic product in the period to 2020, while the ratio of interest to revenue will rise to 17.6 percent by 2020, from 8.6 percent in the last fiscal year. Moody’s said these figures are quite high for a AAA rated country.