Fitch: Extended shutdown, debt ceiling could lower US credit rating
The United States may be in danger of losing its triple-A credit rating if a shutdown drags on and the debt ceiling becomes a political issue, according to credit rating agency Fitch.
“If this shutdown continues to March 1 and the debt ceiling becomes a problem several months later, we may need to start thinking about the policy framework, the inability to pass a budget … and whether all of that is consistent with triple-A,” Fitch’s global head of sovereign ratings, James McCormack, said Wednesday in London, according to Reuters.
{mosads}Speaking to CNBC, McCormack also said that increased spending and lower tax revenue was leading to “a meaningful fiscal deterioration.”
“There needs to be some kind of fiscal adjustment to offset that or the deficit itself moves higher and you’re essentially borrowing money to pay interest on the debt,” he said.
In 2011, the ratings agency S&P downgraded the U.S. government from a perfect triple-A to AA+ as Congress came perilously close to breaching the debt ceiling, which would have led the government to default on some of its debt.
Financial experts have said a debt default would be catastrophic and would likely trigger market chaos.
The next debt ceiling deadline is set for March, but in recent years the Treasury Department has been able to push back the deadline by using “extraordinary measures,” a series of steps that allow the government to borrow money to pay debts without breaching the legal debt limit.
Such measures are expected to put off a final debt showdown until this summer.
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