Source: Wall Street Seewan
Author: Cao Zexi
The main reason to reduce the US credit rating is that the two parties in the United States are over -struggling, excessive expenditure, and excessive tax cuts in the process of formulating the policy, so that the US fiscal system is in many uncertainty.Market analysis believes that even if Fitch sounds the alarm, the two parties in the United States will ignore this and will continue to do these three things.
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Earlier this week, Fitch lowered US sovereign credit rating. Fitch criticized the United States two parties in the process of formulating the policy process, excessive expenditure and excessive tax reduction, so that the US fiscal system was in many uncertainty in many uncertainty.middle.
Although Fitch has lowered the US rating, market analysis believes that the United States will ignore this and will continue to do these three things.
Lowing rating will only allow the two parties to "shake the pot" with each other and exacerbate the struggle
Some analysts believe that the reduction of American rating will only exacerbate the dispute between the two parties.
Fitch said that the endless fighting of the two parties has caused people to worry about the ability of the United States to solve the budget deficit that is expanding, and every time the parliament is preparing to discuss the expenditure of the next fiscal year, the two parties have not considered it to be able to consider it to be able to considerPolicies to effectively solve problems: increase the expenditure of major projects such as taxation or cutting medical insurance and social security.
Shai Akabas, the executive director of the Economic Policy Center of the two -party policy center, believes: "No signs have shown that Congress has political will to solve the problem of unbalanced income and expenditure caused by factors such as welfare plans.Will face a worse situation. "
Bayeng government officials scolded the excellent decision and accused the Trump administration of undermining the stability of the US political system, and also pointed out their own deficit reduction efforts.Republicans believe that the Democratic Party's expenditure plan has led the economy away from the right track and doubled calling for the reduction of budgets, but was rejected by the Biden government.
The market ’s response to the US rating is indifferent to the inferiority, and it seems accustomed to the debt limit of the US debt.In the spring of this year, even if the two parties are not allowed to get in diplomatic relations, the impact of about 25 trillion US dollars (33 trillion yuan) of US dollars (33 trillion yuan) is limited.
Social security and medical insurance expenditures are difficult to cut, and interest rate hikes make the financial burden heavier
With the aging population, social security, medical insurance and medical subsidies -these projects account for about two -thirds of all Federal government spending -it will continue to become more expensive and even difficult.The US Congress Budget Office predicts that social security expenditure will increase from 5.1%of GDP in 2023 to 6.0%in 2033; the expenditure of medical insurance, medical subsidies and other mandatory medical plans from the same period will increase from 5.8%of GDP to 6.6%.
Due to the votes of the elderly and the disabled, the two parties tried to avoid social security and medical insurance overhead in the first half of this year's debate on the upper limit of debt.Even if the current Fitch is lowered to reduce the US rating, this trend will not change.
The factors that promote the growth of deficit also include higher net interest costs, which is a new burden that the Federal Reserve has brought to the US government after the interest rate hike.So far this fiscal year, US interest expenses increased by $ 131 billion, an increase of 25%over the same period of the previous fiscal year.But tax revenue decreased by 11%after last year.
According to data from the US Congress Budget Office, by fiscal 2033, the cost of net interest is expected to reach 3.7%of the US GDP.If investors avoid purchasing U.S. Treasury bonds in the future due to the inferiority reduction in US rating, borrowing costs may rise further.
tax cuts are easy to increase taxes, and US fiscal deficits will continue to expand
In terms of tax cuts, as many tax cuts in Trump will expire, the U.S. Congress will start tax increases as soon as 2025.However, Fitch expects the U.S. Congress will only extend the tax reduction period, thereby further reducing fiscal revenue and increasing deficit.
Democrats may try taxes, but it is difficult.In 2021, when the Democratic Party controlled Congress and the White House, he tried to cancel some of the terms in Trump's tax cutting policy, but it was not successful.
Fitch pointed out in this week's report that its expectations for the rise in US deficit show that the US fiscal prospects are in trouble.According to data from the US Treasury as of June, after the sharp decline in last year, the gap between the first nine months of the fiscal year expanded by 170%.
More economists say that the US fiscal revenue and expenditure has continued for decades, and it will continue, and the relegation of Fitch will not change anything.
