Threat of US credit downgrade looms over debt ceiling talks

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The U.S. government spends far more than it collects in tax revenue and has to borrow the difference. But a quirk in U.S. law requires Congress to periodically raise the government’s debt limit.

Raising the threshold does not authorize new spending. It simply allows Treasury to borrow to pay expenses Congress has already approved. Lawmakers have raised, revised or extended the borrowing cap 78 times since 1960, most recently in 2021.

In its statement Wednesday, Fitch warned: “The brinkmanship over the debt ceiling, failure of the U.S. authorities to meaningfully tackle medium-term fiscal challenges that will lead to rising budget deficits and a growing debt burden signal downside risks to U.S. creditworthiness.” “This is an artificial crisis that has nothing to do with the underlying health of the American economy, excessive imbalances or malinvestment within financial markets or the security of the country,” Brusuelas said. “It is time to bring it to an end.’’

 

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