Washington’s repeated rounds of debt limit drama are “not a characteristic typical” of a AAA rating, according to a top credit rater.
In a statement Wednesday, Fitch Ratings chided policymakers for repeatedly casting doubt on the government’s ability to pay its bills with its brinksmanship over the debt limit.
“Repeatedly casting uncertainty over the full faith and credit of the US risks undermining confidence in the role of the US dollar, having a detrimental effect on the economy, and is not a characteristic typical of a 'AAA' sovereign,” the rater said.
The nation’s $16.7 trillion borrowing cap has been suspended since October, when Congress agreed to temporarily ignore it as part of the agreement to end the government shutdown. But the cap will again take effect on Friday, at which point the Treasury will have to rely on its slate of extraordinary measures to free up funds and continue paying bills.
Treasury Secretary Jack LewJack LewOvernight Finance: House GOP plans short-term spending bill | Senate Republicans not happy | Yellen intends to finish term Lew: Don't paint Wall Street execs with 'broad brushstroke' Dumping Obama’s faux foreign tax legislation should be high on Trump's to-do list MORE said he expects the government can continue paying all its bills on time only through the end of the month.
Meanwhile, Republicans are still trying to figure out exactly what they will try and pair with a debt limit boost, as Democrats insist they will not haggle over avoiding a default.
Fitch is set to review its top-shelf rating of U.S. debt on March 21, but said it could revisit the matter sooner “to reflect developments and events.” The rater placed the U.S. on a “rating watch negative” in October, meaning there are even odds it could be downgraded in the coming year. Fitch said how the debt limit is resolved will be a “key driver” in determining the fate of the U.S. rating.
The nation suffered its first-ever downgrade in 2011 after a particularly nasty fight over the debt limit, as rater Standard & Poor’s contended political brinksmanship had damaged the U.S.’s reputation enough to justify knocking it down a peg. Fitch and fellow rater Moody’s Investors Service have kept the U.S. at the highest rating, but have issued warnings about the nation’s long-term fiscal trajectory, as well as the unproductive drama surrounding its short-term borrowing needs.