Fitch warns of possible credit downgrade with debt limit deadlock

Biden administration officials are warning that the protracted battle over the debt limit puts the U.S. at risk of losing its top credit rating. | Andrew Harnik/AP PhotoFitch Ratings has put the U.S. on notice for a potential credit downgrade as President Joe Biden and Republican lawmakers struggle to reach a deal to raise the debt limit.

Treasury securities are the bedrock of the global financial system, and a downgrade from Fitch — which would mark only the second time a ratings service has knocked U.S. bonds from top-tier status — could drive up borrowing costs on everything from municipal debt to credit cards. While House Speaker Kevin McCarthy said GOP leaders and the White House had made progress on negotiations to tie federal spending cuts to a debt limit increase, lawmakers were allowed to return to their districts for Memorial Day weekend — a sign that no deal is imminent.

“The contested 2020 presidential election, brinkmanship over the debt limit to advance political agendas, and failure to reach consensus on the country’s fiscal challenges are recent signs of the deterioration,” the company wrote.

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