NEW YORK (

TheStreet

) -- Ratings agency

Fitch

Monday affirmed its 'AAA' rating on United States' long-term debt but revised its outlook to "negative" because of declining confidence in the sustainability of government finances.

The change follows the failure of the Congressional Joint Select Committee on Deficit Reduction to agree on a $1.2 trillion deficit reduction plan earlier in November, and puts the federal government's triple-A rating under increasing risk.

In August,

Standard & Poor's

lowered its rating on U.S. debt by one notch to 'AA+', the first downgrade from 'AAA' in the country's history. Also in August,

Moody's

maintained its top rating for the U.S. government debt -- a view it has held since 1917 -- but placed the rating under "negative" status, signaling a potential cut in the future.

In its report released Monday, Fitch said its negative outlook indicates a 50% chance of a downgrade in the next two years. "Failure to reach agreement in 2013 on a credible deficit reduction plan and a worsening of the economic and fiscal outlook would likely result in a downgrade of the U.S. sovereign rating," the agency said in its statement.

In addition to uncertainty over the ability of Congress to reach agreement over spending cuts, Fitch cited increasing questions over tax receipt projections as a result of lingering unemployment and slow economic growth.

As for the $1 trillion in spending reductions that will be triggered automatically if Congress can't reach a consensus, Fitch wrote, "Further deficit reduction will not be credible if it relies solely on further cuts in discretionary spending rather than reform to entitlements and taxation."

Presently, Fitch calculates that the U.S. government's debt will exceed 90% of gross domestic product and that interest costs on the debt will eclipse 20% of tax revenue by 2020. Those debt levels and a GDP growth rate below 2.25% in coming years would challenge the triple-A rating, Fitch said.

In November, third-quarter GDP was revised downward to 2% from a first estimate of 2.5%. Meanwhile, the U.S. budget deficit grew to $1.3 trillion or 8.7% of GDP as of the fiscal year ended in September - the third highest level of indebtedness relative to output since World War II, only eclipsed by 2009 and 2010.

After the U.S. debt downgrade by S&P in August, yields on 10-year notes fell below 2%, reaching record lows as fears of a recession and the eurozone sovereign debt crisis pushed investors to seek safe haven in U.S. bonds. Since 2007, the amount of Treasury debt sold to investors has doubled to $9.7 trillion according to government statistics.

Fitch said it will shortly publish updated projections of growth and the government's fiscal position, however 'in the absence of material adverse shocks' that may come from Congressional deficit reduction plans or the 2012 presidential elections, it doesn't expect any ratings action or a resolution to its negative outlook until late 2013.

Presently, Fitch calculates that the U.S. government's debt will exceed 90% of gross domestic product and that interest costs on the debt will eclipse 20% of tax revenue by 2020. Those debt levels and a GDP growth rate below 2.25% in coming years would challenge its AAA rating, Fitch said.

In November, third quarter gross domestic product was revised downward to 2% from a first estimate of 2.5%. Meanwhile the U.S. budget deficit grew to $1.3 trillion or 8.7% of GDP as of the fiscal year ended in September - the third highest level of indebtedness relative to output since just after World War II. In 2011, the deficit narrowed from levels reached in 2009 and 2010 as the government implemented programs to help the economy recover from the worst recession since the Great Depression.

After the U.S. debt downgrade by S&P in August, yields on 10-year Treasury notes fell below 2% to record lows as fears of a recession and Eurozone crisis overcame increasing credit risk and pushed investors to the safety of Treasuries. Since 2007, the amount of Treasury debt sold to investors has doubled to $9.7 trillion according to Treasury statistics.

Fitch plans to publish updated projections of growth and the government's fiscal position shortly but it doesn't expect any ratings action or a resolution to its negative outlook until late 2013. This view assumes an "absence of material adverse shocks" that may come from congressional deficit-reduction plans or the 2012 presidential elections.

-- Written by Antoine Gara in New York