Fitch Ratings Downgrades US Credit Rating. US Experts Worry that Increased Debt Burden May Hurt US Economic Credit | Rating | US
The international rating agency Fitch recently downgraded the default rating of long-term foreign currency issuers in the United States from AAA to AA+, marking the first time Fitch has downgraded its US credit rating since its release in 1994. According to reports from US media, several US economic experts have stated that the US federal government has failed to take the growing fiscal deficit and the mountain of debt seriously, which may further slow down economic growth.
Shay Akabas, head of economic policy at the Two Party Policy Research Center in the United States, said that the continuous growth of US government debt may ultimately drive up the country's borrowing costs and threaten economic growth. More federal taxes will be used to pay interest on debt rather than creating value for the economy. The federal government may also lose some spending power on social welfare programs and projects that help stimulate the economy, which may slow down economic growth in the long run.
Mark Zandy, Chief Economist of Moody's Analytics, said that the impact of a downgrade to the US credit rating on finance may be long-term. If the US government does not formulate policies to address long-term debt issues, consumers may face rising borrowing costs ranging from credit cards, mortgages to cars, and investors' trust in the US debt repayment will also decrease.
Jeffrey Smith, a professor at the Business School of Arizona State University in the United States, said that in the long run, Fitch's downgrade of the credit rating of the United States might be just the beginning. The mountains of debt in the United States could not be fully paid only through taxes, and the risk of default of American debt was still high, which would seriously hurt the American economy.
The website of Voice of America commented that in recent years, neither party in the United States has taken strict measures to address the country's expanding government debt, resulting in the US government's debt accounting for 113% of GDP, a level never seen since the end of World War II, and this proportion is still rising.
Desmond Rahman, a senior researcher at the American Enterprise Research Institute, said that Fitch's announcement of a downgrade to the US credit rating is a "warning" for US decision-makers who need to take the issue of fiscal deficits seriously. Fitch's downgrade of the US credit rating may have potential negative impacts on the US economy and even the global economy. The long-term budget imbalance will have to prompt overseas investors to reconsider whether to invest funds in a government that seems incapable and unwilling to balance its fiscal budget.
