Key takeaways:
- Fitch Ratings has downgraded the United States from AAA to AA+ due to growing debt and eroding political stability
- The downgrade could lead to higher borrowing costs for the government and businesses
- The downgrade is a reminder that the nation must take steps to address its growing debt and political instability in order to maintain its credit rating and economic stability
The United States has been downgraded by Fitch Ratings, a leading global credit ratings agency, from the highest rating of AAA to AA+. This downgrade comes two months after the debt-ceiling crisis was resolved, and is due to the nation’s growing debt and eroding political stability.
Fitch said in a statement Tuesday that the U.S. appeared to suffer from an “erosion of governance,” citing the Washington brinkmanship over the debt ceiling as an example. The agency also noted that the fiscal shocks from the pandemic, new spending and tax cuts have brought the debt to 113% of the national economic output.
Despite the downgrade, the U.S. still holds among the highest possible ratings, with Fitch saying the nation still benefits from a “large, advanced, well-diversified and high-income economy.” The agency also said that the U.S. has a “deep and liquid capital markets,” and “a strong institutional framework.”
The downgrade is a warning sign for the U.S. economy, as it could lead to higher borrowing costs for the government and businesses. It also highlights the need for fiscal discipline and political stability in order to maintain the nation’s credit rating.
The downgrade is the latest in a series of warnings from ratings agencies, as the U.S. continues to grapple with the economic fallout of the pandemic. It is a reminder that the nation must take steps to address its growing debt and political instability in order to maintain its credit rating and economic stability.
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