“Fitch Ratings, a credit rating company, is considering downgrading the AAA rating of the United States government bonds. The problem is not the economy. In fact, the Fitch Ratings report praises the economy, saying it “has recovered much more rapidly than expected, helped by policy stimulus and the roll-out of the vaccination program, which has allowed economic reopening…. [T]he scale and speed of the policy response [is] a positive reflection on the macroeconomic policy framework. Real economic output has overtaken its pre-pandemic level and is on track to exceed pre-pandemic projections….”
“Although the report worries about the growing debt, we also learned yesterday that the deficit for June dropped a whopping 80% from the deficit a year ago, as tax receipts recover along with the economy. Year-to-date, the annual deficit is down 18% from last year.”
“The problem, the report says, is politics. And it is specific.” “The failure of the former president to concede the election and the events surrounding the certification of the results of the presidential election in Congress in January, have no recent parallels in other very highly rated sovereigns. The redrafting of election laws in some states could weaken the political system, increasing divergence between votes cast and party representation. These developments underline an ongoing risk of lack of bipartisanship and difficulty in formulating policy and passing laws in Congress.”
Thanks to Boston College historian Heather Cox Richardson for this blog post.
Source: Financial Planning for Women