25th May 2023 – (New York) Fitch Ratings announced on Wednesday that it has placed the U.S. AAA-rated long-term foreign-currency issuer default rating on a “negative watch” as the debt ceiling deadlock continues. The agency cited increased political partisanship that is hindering reaching a resolution to raise or suspend the debt limit as the reason for the negative watch.
Despite reaching the $31.4 trillion debt limit in January, discussions between the White House and congressional leaders only began on May 9, less than a month before the estimated date of a US government default on its debt obligations.
The debt ceiling is the maximum amount of debt that the US government can legally issue. If the debt ceiling is not raised or suspended, the government will not be able to borrow money to pay its bills, including interest on existing debt. This could lead to a government default on its debt obligations, which would have severe consequences for the US economy and the global financial system.
The U.S. has a long history of raising the debt ceiling to avoid defaulting on its debt obligations. However, the process has become increasingly politicised in recent years, with both parties using it as a bargaining chip to advance their political agendas.
The current deadlock over the debt ceiling comes amid heightened political polarisation in the U.S., with the two major parties deeply divided over key issues such as taxation, spending, and social policy. This has made it difficult to reach a compromise on the debt ceiling, raising concerns about the U.S.’s ability to manage its finances effectively and maintain its credit rating.