Fitch flags Concerns Over US Fiscal Policy Challenges

Congress has had frequent battles in recent years over the best way to tackle growing spending commitments, with lawmakers divided over whether to tax more, spend less, or do both at the same time.

That is unlikely to change with the return of President-elect Donald Trump.

The United States now faces "significant fiscal policy challenges in 2025 relating to the debt limit, appropriations, and tax cuts in the context of already large deficits and an increasing debt burden," Fitch Ratings said.

"We believe it is unlikely that these will be resolved expeditiously because of long-standing weaknesses in the federal government's budgetary process and a narrow Republican House majority," it added.

"The absence of a unifying budget process and the forthcoming policy debate around additional tax cuts and spending adjustments amid a still-challenging political backdrop means that important decisions are likely to be reached on an ad hoc, issue-by-issue basis," they continued.

The note said that the "base-case assumption" was, however, that issues would be resolved.

The situation, they added, underscores the United States' "deterioration in governance on fiscal matters over recent years."

Source: HDN