Fitch Ratings downgraded the U.S. government’s credit rating from “AAA” to “AA+” on Tuesday, a signal that the agency no longer has complete confidence in the government’s ability to avoid default. The rating “reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance … that has manifested in repeated debt limit standoffs and last-minute resolutions.” The ratings downgrade will increase federal borrowing costs, and it undermines the narrative that the economy is currently flourishing.
“There has been a steady deterioration in standards of governance over the last 20 years,” Fitch stated. “The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management.” They also cited no “medium-term fiscal framework,” “successive debt increases,” and “only limited progress in tackling” the impending fiscal cliff of Social Security and Medicare insolvency.
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