U.S. Credit Rating Downgraded by Fitch, Experts Warn of Economic Slowdown
The United States has been hit with a downgrade in its credit rating by international rating agency Fitch. The long-term foreign currency issuer default rating of the US has been lowered from AAA to AA+. This downgrade has raised concerns among US economic experts, who believe that the federal government has failed to address the mounting fiscal deficit and debt problems, potentially leading to a slowdown in economic growth.
Shai Akabas, director of economic policy at the Bipartisan Policy Research Center, warned that the growing debt of the US government could lead to increased borrowing costs and threaten economic growth. The federal government will have to allocate more tax revenue towards paying off the interest on the debt, instead of using it for programs that stimulate the economy. This shift in spending priorities could have long-term negative effects on economic growth.
Moody’s Analytics chief economist, Mark Zandi, stated that the financial impact of the credit rating downgrade may be long-lasting. Consumers may face higher borrowing costs across various sectors, such as credit cards, mortgages, and autos. Investors may also become less confident in the US government’s ability to repay its debts if long-term debt concerns are not addressed through policy changes.
Jeffrey Smith, a professor at Arizona State University’s Business School, believes that this downgrade may just be the beginning. The US’s current debt level cannot be fully addressed through taxes alone, and the risk of debt default remains high. If not properly managed, this could severely damage the US economy.
The Voice of America radio website noted that in recent years, both political parties in the US have failed to take significant measures to tackle the growing government debt. As a result, the US government’s debt now stands at 113% of GDP, the highest since the end of World War II. This ratio continues to rise, posing a significant challenge to the economy.
Desmond Rahman, a senior fellow at the American Enterprise Institute, called Fitch’s downgrade a “warning call” to US policymakers. He emphasized the need for policymakers to take the fiscal deficit seriously. The downgrade may have a negative impact not only on the US economy but also on the global economy. Chronic budget imbalances will force overseas investors to reconsider investing in a government that appears incapable of balancing its budget.
The downgrade by Fitch serves as a wakeup call for the US government to urgently address its fiscal deficit and debt issues. Failure to take appropriate action could lead to dire consequences for the US economy and its standing in the global market.