CNN –
A deadlocked Congress that has brought America to the brink of default could jeopardize the United States’ perfect credit rating, Fitch said in a stark warning on Wednesday.
The rating agency has placed top US credit ratings on the negative rating list, reflecting uncertainty surrounding the current debt ceiling debate and the possibility of a first default.
The move comes at a time when Republican and Democratic lawmakers are negotiating a hike in the US debt limit, though no agreement has yet been reached. With Treasury Secretary Janet Yellen declaring that the US may not be able to pay its bills as early as June 1, the country faces the possibility of an unprecedented default affecting both the United States and the world could have catastrophic effects.
Fitch, one of the top three rating agencies alongside Moody’s and S&P, has put the US on “rating watch negative” of “AAA”, signaling that it could downgrade the US debt if lawmakers don’t agree on a bill that would raise the US Treasury Department’s debt ceiling.
“The Rating Watch Negative reflects increasing political partisanship that, despite the fast approaching x-date (when the US Treasury will exhaust its cash holdings and capacity for extraordinary measures without incurring new debt), a solution to raising or suspending the Debt ceiling hampered,” the company said in a statement.
Fitch added, however, that it’s still expected that lawmakers will pass an order before the “X-date.”
The White House on Wednesday cited Fitch Ratings’ move as a reason for the urgency of raising the debt ceiling.
“This is further proof that defaulting on payments is not an option and that is clear to all responsible lawmakers. “It reinforces the need for Congress to quickly pass a sensible, bipartisan agreement to prevent a default,” a White House spokesman said in a statement.
The Treasury Department also emphasized this on Wednesday evening and said that a possible downgrade shows why Congress must deal with the debt ceiling immediately.
“As Secretary of State Yellen has warned for months, risky breaching of the debt ceiling seriously harms businesses and American families, increases short-term borrowing costs for taxpayers and threatens the creditworthiness of the United States,” Treasury Secretary Lily Adams said in a statement.
“Today’s warning underscores the need for swift bipartisan action by Congress to raise or suspend the debt limit and prevent an artificial crisis in our economy,” Adams said
In 2011, S&P downgraded the US credit rating for the first time ever, lowering the rating to AA+. More than a decade later, this agency still hasn’t restored its rating.
According to experts, a US default could send shock waves across the global economy and potentially trigger a recession. That could mean higher borrowing costs for the government and Americans themselves, and a massive brake on economic growth.
Dow futures fell more than 85 points Wednesday night on Fitch’s warning, but the S&P 500 and Nasdaq were in positive territory.