Fitch said that brinkmanship over debt ceiling negotiations and “last-minute resolutions” had increased in recent year, which has “eroded confidence in fiscal management”.
In a statement yesterday (1 August), Fitch pointed to the «expected fiscal deterioration over the next three years» in the country, as well as the «steady deterioration in standards of governance»
In May, Congress reached a conclusion to their debate over the debt ceiling, with a deal being reached after months of negotiations and threats that the US may default on its debt.
US debt ceiling crisis shakes bond market
Congress must vote to raise the amount it can borrow to pay for spending it has already committed to, also known as the debt ceiling, with the next deadline set for January 2025.
Brinkmanship over debt ceiling negotiations and «last-minute resolutions» had increased in recent years Fitch said, which has «eroded confidence in fiscal management».
The most recent fight over the debt ceiling saw some Republicans in Congress suggest that the US should default on its debt rather than continue to increase, an idea that worried markets.
«These factors, along with several economic shocks as well as tax cuts and new spending initiatives, have contributed to successive debt increases over the last decade,» said the ratings agency.
«Additionally, there has been only limited progress in tackling medium-term challenges related to rising social security and Medicare costs due to an aging population.»
Government deficit is expected to increase in the US, rising to 6.3% of GDP this year compared to 3.7% of GDP in 2022. Furthermore, state and local government deficits will jump from a 0.2% of GDP surplus last year to a 0.6% deficit.
As interest rates
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