The rating agency fitch said on Wednesday that it had put the “AAA” sovereign rating on USA in negative credit watch due to growing political disputes and the uncertainty around the debt limit from the country.
Fitch noted that the country’s rating could be lowered if USA does not raise or suspend your debt limit on the scheduled date. However, he added that the chances of the United States not paying its debts on time are very low.
Fitch now predicts that the US government will spend more than it takes in, creating a deficit of 6.5% of the country’s total economy in 2023 and 6.9% in 2024.
This Wednesday, the main Wall Street indices they closed down in the absence of agreement between the White House and Republican congressmen about the increase in debt ceilingfanning the fear of unprecedented government default.
The Democratic President’s Negotiators Joe Biden and the main Republican congressman kevin mccarthy they met again at the White House this wednesday to try To close a deal that allows raise the US debt ceilingof US$31.4 billionand avoid a catastrophic default.
He Treasury Department He warned that the federal government might be unable to pay all its bills in eight days, while passing the legislation would take several days in a highly divided Congress.
Default risk?
To eliminate the risk of a default, Congress must increase the country’s debt limit. The Senate is controlled by the Democrats and the Republicans control the House of Representatives.
The so-called “debt ceiling,” of more than $31 trillion, was reached in January, but the federal government has so far managed the situation through accounting manoeuvres.
By not honoring its obligations, the United States would no longer be able to pay Treasury bondholders, refuge of world finance. The government could not pay subsidies or pensions either, for example.
The consequences for the world economy would be catastrophic, warn economists.
Meanwhile, the president Biden offered to freeze some public spending at their current levelswhich would reduce the fiscal deficit by an additional $1 trillion over 10 years, Treasury Secretary Janet Yellen said Wednesday.
The savings proposed by Biden should reduce the differences between the plans of Republicans and Democrats in terms of public spending, the center of the disagreement that has the United States counting the days until a default.
Expenditure Adjustment
The Treasury secretary has reiterated that the government could run out of funds on June 1st. “The president’s budget plan actually proposes a $3 trillion deficit reduction over 10 years,” Yellen said. at an event for The Wall Street Journal on Wednesday.
“In this negotiation, the president offered changes that could result in an additional deficit reduction of another trillion dollars,” he explained.
Republicans say their spending plans cut the deficit by $4.8 trillion over a decade, with no cuts for defense or border security.
The White House wants to distribute any cuts so as not to burden some sectors, and wants to raise some taxes, something Republicans oppose.
The Republican leader of the House of Representatives, Kevin McCarthy, who is leading the talks with Biden and the opposition’s demands for spending cuts, said that there could be “progress today”, in reference to the negotiations underway during the day. However, he again accused the government of waiting until the last minute to negotiate.
Source: Ambito
