The logo of Fitch Ratings is seen at their offices in the Canary Wharf financial district in London, UK.
Reinhard Krause | reuters
It is not a growing job market, a strong US dollar or a resilient economy that will help the US earn the top rating from Fitch. According to the firm, it is going to take a big step in governance.
Fitch Ratings cuts United States long term forex issuer default rating Global stock markets declined on Wednesday, from AAA to AA+ on Tuesday. The agency had put the country’s rating on negative watch in May, citing the debt ceiling issue.
“This is a consistent decline that we have seen in key metrics for the United States for several years. In 2007, general government debt was less than 60% and now it is 113%, so there has been a clear decline,” Fitch’s US sovereign Richard Francis, co-head of ratings, said Wednesday on CNBC “Scream on the street.” “Also, we are expecting the fiscal deficit to widen in the next three years and we expect the debt to continue to rise in the next three years.”
Francis said that, in addition to the January 6, 2021 infighting, the ratings agency noted “continued volatility” over the debt ceiling between both Republicans and Democrats. He said this has hindered the US government from offering meaningful solutions to deal with mounting fiscal issues, especially for entitlement programs such as Social Security and Medicare.
To earn the top rating, Francis said the ratings agency will seek a long-term fiscal solution that addresses entitlement programs and aspires to look at the revenue, as well as the expense side, of such programs. He also said that Fitch would focus on reducing the deficit and that the government would deal with the debt ceiling issue by suspending or getting rid of it.
Francis said, “Given the high level of debt, given the growing deficit that we are expecting, and given the decline in governance and reluctance to deal with these issues, we do not think it is any longer the case for AAA.” conforms.” ,
many feedbackFrom high-profile economists to the White House, critics are criticizing or dismissing the downgrade given the resilience of the country’s economy.
In response to the pushback, Francis said that although the economy is very important and can have an impact on America’s overall fiscal picture, it will not be enough to deal with governance issues.
“The idea that the economy will somehow survive a recession and the ratings should not be downgraded, that’s not really what we’re seeing,” he said. “We’re looking at a more fundamental picture of the United States, the creditworthiness and what we expect to happen over the next few years.”