Policy Backgrounders
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Navigating the Economic Storm

Policy Backgrounders

CED’s Policy Backgrounders provide timely insights on prominent business and economic policy issues facing the nation.

Fitch Downgrades US Rating Amid Fiscal and Governance Concerns

August 03, 2023

Fitch Ratings downgraded the credit rating of US debt obligations this week after warning of a potential
downgrade during the debt ceiling negotiations that were resolved in June.

  • Fitch cited a worsening US fiscal outlook over the next three years in addition to deteriorating standards of governance over the past two decades that impair the ability of the US to take action on fiscal and debt matters.
  • Fitch forecasts the US publicly held debt to GDP ratio to rise to 118 percent by 2025, from 98.2 percent today and from 79.4 percent pre-pandemic. That compares to 39.3 percent for the median AAA-rated peer country. Over the first 9 months of the current fiscal year, the federal deficit hit $1.39 trillion—more than 170 percent higher than the same period in FY 2022.
  • Fitch noted that the US, unlike most peers, does not have a medium-term fiscal framework and cited addressing tax revenues, Social Security, and healthcare spending—items that have largely remained off the table as Congress negotiated the debt ceiling and FY 2024 appropriations bills. Disagreement between the Senate and House continues to raise the likelihood of at least a partial government shutdown as the October 1 fiscal year deadline approaches.

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Authors

Dr. Lori Esposito Murray

Dr. Lori Esposito Murray

Former President

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Mitchell Barnes

Mitchell Barnes

Senior Economic Policy Analyst

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