AAA at risk
Rating agency Fitch puts USA under surveillance
05/25/2023 02:13 am
The US could run out of money in a few days, and it is still unclear whether the debt ceiling will be raised in time. The rating agency Fitch draws the first conclusions.
The rating agency Fitch has put the United States under surveillance because of the debt dispute and an impending default. As a result, the United States could lose its top rating of AAA for its creditworthiness, as Fitch announced on Wednesday evening (local time).
As justification, the rating agency referred to the political dispute in Washington, which is currently preventing an increase in the debt ceiling despite a possible default “rapidly approaching”. Fitch stated that it still expects a solution to the debt dispute before “Day X” – the day of insolvency. “However, we believe that the risks have increased that the debt limit will not be raised or suspended before X-Day and that the government could subsequently start defaulting on some of its commitments.”
Time is running out
The government of US President Joe Biden and the opposition Republicans have been arguing for months about raising the debt ceiling. Without an agreement, the USA is threatened with insolvency for the first time in its history at the beginning of June, with potentially devastating economic and financial consequences far beyond the country. Treasury Secretary Janet Yellen has repeatedly warned that as early as June 1st could be this so-called Day X.
The United States had already reached the statutory debt limit of just under $31.4 trillion (around €29 trillion) in January. Since then, the US government has been using so-called extraordinary measures to prevent insolvency, but the options for doing so are soon exhausted.
Republicans want billions in savings before agreeing to raise debt limit. The US debt limit has been suspended or raised dozens of times by presidents of both parties over the past few decades – and with bipartisan majorities. This year, however, the Republicans are flexing their muscles with their new majority in the House of Representatives, which they achieved in the midterm elections in autumn 2022. Biden is poised to cut but also wants to raise taxes on the wealthy and big companies to reduce the budget deficit. Republicans strongly disagree.