WASHINGTON (AP) — Fitch has lowered the outlook for its U.S. government credit rating to “negative” from “stable” due to soaring budget deficits, but the agency is keeping its overall rating at the highest AAA level.
Fitch said Friday that the downgraded outlook reflects the surge in government debt and “the absence of a credible fiscal consolidation plan” to get the deficits under control.
Credit rating agencies often use changes in outlooks to signal possible future moves in the overall rating.
The Congressional Budget Office has projected that the deficit for this budget year, which ends Sept. 30, will surge to an all-time high of $3.7 trillion. That would be up from an already high deficit of $984.4 billion last year.
This year's deficit is being driven higher by the severe recession triggered by efforts to contain the coronavirus and the spending Congress has authorized to cushion the impact of that downturn.
The government's deficit for just the month of June hit $864 billion, the highest one-month total, and was part of an imbalance of $2.74 trillion for the first nine months of this budget year.
All the borrowing has pushed public debt to $26.5 trillion currently.
The Fitch report said, “There is a growing risk that U.S. policymakers will not consolidate public finances sufficiently to stabilize public debt after the pandemic has passed.”
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Depending on how you look at it, the economic outlook is getting cloudier or clearer.
The argument for a cloudy economy is easy to make. Multiple times of day we hear about more Americans testing positive for the novel coronavirus. The worldwide number of positive tests exceeds one million. And unfortunately, it will go higher. We just don’t know by how much.
But there are two parts to this ongoing situation. The first is the real-time science experiment as the world attempts to flatten the curve. The other is the very real economic impact. And the numbers of the economic carnage are coming in faster than any significant evidence of a flattening curve.
The number of unemployed now exceeds six million and will only rise. The government is throwing everything including the kitchen sink at the problem. But it’s an experiment in real-time. We won’t know the results for some time.
But even while we wait for a new normal to return, there are ways for you to profit. There are companies that are keeping our economy going now, and have a business model that sets them up well for success after the pandemic is over.
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