President and CEO, U.S. Chamber of Commerce
August 03, 2023
Here are three reactions to the Fitch Ratings downgrade:
First, the impact on the cost of borrowing and on the markets will be minimal. That is because America is still the safest investment in the world. No one should ever bet against us, thanks in large part to the resilience and innovation of the American business community.
Second, that said, the downgrade is a reminder that our elected leaders on both sides of the aisle are playing with fire when it comes to the debt limit and our debt and deficit. Leveraging the debt limit against the threat of default has become alarmingly frequent and proposals from both parties to side-step the limit by “invoking the 14th Amendment” or “prioritizing payments” only increases the risk that one day leaders will miscalculate and actually default on our obligations. Retirement and healthcare programs along with rising interest payments on our debt are pushing the fiscal outlook into unchartered territory with deficits growing as a share of the economy each year, crowding out private investment and making America poorer. The longer these challenges are left unaddressed, the more difficult it will be to solve them.
Third, this greater fiscal risk is only compounding the other policy risks holding back American businesses and the economy. As we have documented, public policy risks identified by businesses—new regulations, taxes, tariffs, legal liability—have soared 27% over the past decade. By comparison, normal business risks—such as changing consumer demand, brand risk—were flat. Unfortunately, American businesses are having to add our government’s fiscal health and willingness to pay its bills to the list of headwinds.