WASHINGTON — A stark new warning from the Fitch credit rating agency about U.S. debt added fresh urgency Thursday to ongoing debt ceiling negotiations between the White House and congressional Republicans, with only seven days to go before the United States faces an imminent threat of debt default.
Fitch Ratings, one of the big three ratings agencies, announced late Wednesday that it had placed the United States’ triple-A status on “rating watch negative.”
“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,” Fitch said in a statement on the decision.
The agency also strongly implied that if Congress could not reach a deal before the Treasury Department’s June 1 deadline to raise or suspend the debt limit, Fitch would downgrade America’s credit rating.
Such a failure “would be a negative signal of the broader governance and willingness of the U.S. to honor its obligations in a timely fashion, which would be unlikely to be consistent with a ‘AAA’ rating, in Fitch’s view.”
The warning came just hours after House Speaker Kevin McCarthy sought to calm jittery financial markets.
“I wouldn’t scare the markets in any shape or form,” the California Republican said Wednesday on Fox Business. “We will come to an agreement … and there should not be any fear.”
On Thursday, negotiators appeared to have made little discernible progress in more than a week of near round-the-clock talks.
Adding to concerns about the deadline was the decision by House leadership to send members home for a weeklong recess, albeit with instructions to stand ready to return to D.C. if their votes were needed to pass a compromise bill resulting from a deal reached by President Joe Biden and McCarthy.
“I don’t know if we have a deal today,” McCarthy said Thursday morning as he entered the Capitol.
“We’ve already talked to the White House today, we’ll continue to work,” he said on his way out, following the day’s only vote series. “They’re working on numbers, we’re working on numbers and we’ll work together.”
One influential Republican said he was optimistic about reaching a deal before the holiday weekend. Rep. Kevin Hern of Oklahoma, who chairs the 156-member Republican Study Committee, said Thursday that he believed it was “likely” a deal would be reached by Friday afternoon.
“We are inching closer to a deal. I think it’s some of the finer points they are working on right now,” Hern told Reuters. “You are likely to see a deal by tomorrow afternoon.”
Democrats meanwhile, have become increasingly critical this week of the White House’s apparent choice not to divulge details of the talks on a regular basis. It’s a tactic that stands in stark contrast to McCarthy’s full court PR press of chatting with journalists several times a day about the talks and appearing on TV near daily.
The White House sought to deflect the criticism, arguing that Biden had been speaking about the debt ceiling for months.
“We’ve been very clear for the past five months,” White House press secretary Karine Jean-Pierre said earlier this week. “I wouldn’t just look at the last couple of days. The past five months, consistently, you’ve heard from this president.”
On Thursday, White House chief of staff Jeff Zients issued a rare tweet on the debt ceiling.
“Even now, Republicans want to add $3.5 trillion to the debt by extending the Trump tax giveaways for the wealthy,” he wrote. What Zients didn’t say is that Biden also wants to extend those cuts, but only for households making less than $400,000, and offset the cost by raising other taxes.
This is a developing story. Please check back for updates.