Rating agency reacts: US could lose top AAA rating

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As the reasoning, the rating agency cited the political conflict in Washington, which currently prevents an increase in the debt ceiling despite a possible default “approaching fast”.

Fitch said it is still waiting for a resolution to the debt dispute before “Day X”, which is the day of bankruptcy. “However, we believe there are increasing risks that the debt limit may not be raised or suspended before X-Day and the government may start to honor some of its commitments later on.”

US President Joe Biden’s government and opposition Republicans have been arguing for months over raising the debt limit. Without a deal, the United States faces the threat of bankruptcy in early June for the first time in its history, with potentially devastating economic and financial consequences far beyond the country. Treasury Secretary Janet Yellen has repeatedly warned that as early as June 1 this could be the so-called X-Day.

The United States had already reached its statutory debt threshold of just under $31.4 trillion (about €29 trillion) in January. Since then, the US government has been using so-called extraordinary measures to avoid bankruptcy, but the options for doing so are soon running out. Republicans want billions in savings before agreeing to increase the debt limit.

The US debt limit has been suspended or raised dozens of times over the past few decades by the presidents of both parties and by majority of both parties. This year, however, Republicans are flexing their muscles with their new majority in the House of Representatives in the fall 2022 midterm elections.

Biden is willing to cut to reduce the budget deficit, but also wants to increase taxes on the rich and large corporations. Republicans certainly disagree.

(SDA)

Source :Blick