The United States has long prided itself on its AAA credit rating, but recent events could mean the country could lose such a privilege unless the White House and Congress come to a final decision regarding the country’s debt ceiling.
Credit ratings agency Fitch recently placed the United States on rating watch negative in light of the ongoing congressional impasse, as well as the looming possibility of an economic default.
Fitch made the decision even as both sides of the House continue to bicker about raising the country’s debt limit. As of press time, no deals have been finalized in Congress – and time is running out as Treasury Secretary Janet Yellen warns that the country may be unable to pay its bills by June 1st.
Unprecedented in any country’s history, this default will not only have an adverse effect on the United States, but other parts of the world, as well.
Not the Only One
But Fitch isn’t the only credit rating agency that has cast a wary eye on the situation in the US; both Moody’s and S&P have put the country’s AAA rating under rating watch negative status. This raises the very real possibility that all three agencies could downgrade the country’s debt if lawmakers stay deadlocked regarding the debt ceiling issue.
According to the press statement issued by Fitch as of Wednesday, May 24th, their decision is a reflection of the hyperpartisanship that continues to keep Congress from making a resolution as to raise or suspend the country’s debt limit despite the rapidly approaching deadline.
Based on Yellen’s forecast, June 1 is the most realistic date on which the Treasury will have exhausted both its cash position and its capacity to effect extraordinary measures without incurring new debts.
The White House Speaks Up
White House officials echoed the urgency inherent in Fitch’s move and called upon lawmakers to set aside partisan differences and come to a reasonable agreement to stave off default.
As one official puts it, the decision of all three credit ratings agencies to put the country’s AAA rating under rating watch negative is solid evidence that a default is not an option, something that lawmakers need to understand.
Treasury spokesperson Lily Adams also reminded lawmakers that Secretary Yellen has warned them about the consequences of a debt impasse for the past several months, adding how brinkmanship over the issue will have a severe impact on the economy as it will raise short-term borrowing costs for taxpayers.
