On Thursday, Fitch, the rating agency, said the U.S. fiscal profile is likely to remain largely unchanged regardless of who wins the upcoming presidential election, as it affirmed the United States of America’s credit rating at “AA+”, citing structural strengths including high per capita income and financial flexibility.
Democratic Vice President Kamala Harris’ late entry into the presidential race after President Joe Biden’s withdrawal in July tightened the race against Republican candidate Donald Trump. This week’s Reuters/Ipsos poll showed she leads 45% to 41%.
“The outcome of the upcoming November 5, 2024, presidential and congressional elections will be important for U.S. economic and fiscal policies,” Fitch said in a statement.
“However, Fitch believes the underlying fiscal position will remain largely unchanged despite the differing economic objectives, tax policies, and spending priorities of Vice President Kamala Harris and former President Donald Trump.”
The agency expects most of the tax cuts introduced by Trump in 2017 to be extended under either candidate, impacting revenues and contributing to wider budget deficits.
“The government has failed to meaningfully tackle large fiscal deficits, the growing debt burden, and looming increases in spending associated with an aging population,” it said.
Fitch cut the U.S. government’s top credit rating by one notch last year, drawing an angry response from the White House. The downgrade came after Democratic President Joe Biden and the Republican-controlled House of Representatives reached a debt ceiling agreement that lifted the government’s $31.4 trillion borrowing limit, ending months of political brinkmanship.
On Thursday, the agency said it maintained its rating, with a stable outlook, due to the U.S. economic strength and financial flexibility coming from the issuance of U.S. dollars, the world’s leading reserve currency.
Still, it said high fiscal deficits and the debt burden put the country below the median of equally rated sovereigns.
“The U.S. standards of governance are also below its ‘AA’ rated peers,” it said.
(Source: ReutersReuters)
