Article from For Liberty by Norm Leahy.

Fitch Ratings moved its long term outlook for U.S. sovereign debt from “stable” to “negative,” even as it maintained a triple-A rating for the current debt.

The company says the U.S. has a higher “debt tolerance to be higher than that of other ‘AAA’ sovereigns.” But there are limits to how much debt the market will tolerate.

Moving the long term outlook to negative reflects “the ongoing deterioration in the U.S. public finances and the absence of a credible fiscal consolidation plan.”

And, Fitch believes, the political class shows no intention of developing such a plan, even after the current economic crisis end. That’s in part because the government was fiscally irresponsible long before the coronavirus appeared:

High fiscal deficits and debt were already on a rising medium-term path even before the onset of the huge economic shock precipitated by the coronavirus. They have started to erode the traditional credit strengths of the US. Financing flexibility, assisted by Federal Reserve intervention to restore liquidity to financial markets, does not entirely dispel risks to medium-term debt sustainability, and there is a growing risk that U.S. policymakers will not consolidate public finances sufficiently to stabilize public debt after the pandemic shock has passed.

In 2011, Standard & Poor’s downgraded U.S. sovereign debt from AAA to AA+ citing insufficient political action to curtail government spending and deficits.

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