How A Downgrade To The U.S. Credit Rating Could Affect The Economy

Top Democrats say President Donald Trump walked out of a meeting with congressional leaders as talks to end the partial government shutdown remain at an impasse." (Jan. 9) AP

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The government shutdown is starting to raise concerns about Congress’s ability to raise the U.S. debt ceiling and pass a budget — worries that ultimately could affect borrowing costs for consumers and businesses, as well as the overall economy.

Over the past week, Fitch Ratings has said the shutdown could lead to lawmakers’ failure to raise the nation’s debt limit, or borrowing authority, later this year. That, in turn, could well prompt Fitch, and other credit rating agencies, to lower the country’s triple-A sovereign rating.

And that would spell trouble for an economy that’s already expected to slow this year.

“What we’re saying is the shutdown is more evidence there is some lack of cohesion in policymaking,” Charles Seville, Fitch’s senior director, said in an interview Wednesday.

The rating agency’s message was an early warning shot in a drama that’s expected to play out over the coming months. But Fitch made clear it views the risk of Congress not raising the debt limit as “remote.” And it issued no formal warning or negative outlook on the nation’s creditworthiness.

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A sign outside the closed National Museum of the American Indian in Lower Manhattan is seen on Jan. 12, 2019, as the partial US government shutdown entered a record 22nd.
A sign outside the closed National Museum of the American Indian in Lower Manhattan is seen on Jan. 12, 2019, as the partial US government shutdown entered a record 22nd. Johannes Eisele, AFP/Getty Images>FullscreenThe entrance of the Miami International Airport's Terminal G remained closed due to the government shutdown, in Miami, Florida, USA, 12 January 2019. The current partial shutdown of the US federal government has become the longest in US history, on Jan. 12, 2019 surpassing the previous 21-day shutdown of 1995-1996. Over 800,000 federal employees are impacted by the shutdown, with around 400,000 furloughed and being paid later and the rest deemed 'essential', who must work without pay, though retroactive pay is expected, with January 11 marking the first missed paycheck.
The entrance of the Miami International Airport's Terminal G remained closed due to the government shutdown, in Miami, Florida, USA, 12 January 2019. The current partial shutdown of the US federal government has become the longest in US history, on Jan. 12, 2019 surpassing the previous 21-day shutdown of 1995-1996. Over 800,000 federal employees are impacted by the shutdown, with around 400,000 furloughed and being paid later and the rest deemed 'essential', who must work without pay, though retroactive pay is expected, with January 11 marking the first missed paycheck. Cristobal Herrera, EPA-EFE>FullscreenUS Secret Service officers stands post on Pennsylvania Avenue outside of the White House in Washington, DC on Jan. 12, 2019. The current partial shutdown of the US federal government, now the longest in US history, has many federal employees including Secret Service agents and officers working unpaid.
US Secret Service officers stands post on Pennsylvania Avenue outside of the White House in Washington, DC on Jan. 12, 2019. The current partial shutdown of the US federal government, now the longest in US history, has many federal employees including Secret Service agents and officers working unpaid. Shawn Thew, EPA-EFE>FullscreenAn empty entrance line is seen as signs hang on the doors of the Smithsonian National Museum of African American History and Culture indicating that the museum is closed because of the partial government shutdown in Washington, DC, Jan. 9, 2019. A cornered President Donald Trump will hold talks with congressional leaders Wednesday over his demand for a US-Mexico border wall, with his options running out for ending a prolonged partial government shutdown over the impasse. Trump gave a nine-minute prime-time address Tuesday night to make the case for his signature domestic policy idea, but made no concessions to opposition Democrats, who have rejected funding for the project.
An empty entrance line is seen as signs hang on the doors of the Smithsonian National Museum of African American History and Culture indicating that the museum is closed because of the partial government shutdown in Washington, DC, Jan. 9, 2019. A cornered President Donald Trump will hold talks with congressional leaders Wednesday over his demand for a US-Mexico border wall, with his options running out for ending a prolonged partial government shutdown over the impasse. Trump gave a nine-minute prime-time address Tuesday night to make the case for his signature domestic policy idea, but made no concessions to opposition Democrats, who have rejected funding for the project. Saul Loeb, AFP/Getty Images>FullscreenMembers of the US Secret Service Uniformed Division patrol outside of the White House in Washington, DC, Jan. 9, 2019, on the 18th day of the partial government shutdown.
Members of the US Secret Service Uniformed Division patrol outside of the White House in Washington, DC, Jan. 9, 2019, on the 18th day of the partial government shutdown. Saul Loeb, AFP/Getty Images>FullscreenU.S. Senate Majority Leader Sen. Mitch McConnell (R-KY) is chased by members of the media after he returned to the U.S. Capitol from a meeting at the White House Jan. 9, 2019 in Washington, DC. President Trump walked out of a meeting with congressional leaders at the White House negotiating border security funding and government shutdown, calling it a total waste of time.
U.S. Senate Majority Leader Sen. Mitch McConnell (R-KY) is chased by members of the media after he returned to the U.S. Capitol from a meeting at the White House Jan. 9, 2019 in Washington, DC. President Trump walked out of a meeting with congressional leaders at the White House negotiating border security funding and government shutdown, calling it a total waste of time. Alex Wong, Getty Images>FullscreenPassengers wait in a Transportation Security Administration line at JFK airport on Jan. 09, 2019 in New York City. Its been reported that hundreds of TSA screeners and agents have called in sick from their shifts from a number of major airports as the partial government shutdown continues. Employees of the TSA, whose job it is to keep airlines safe, are being forced to work without knowing when their next paycheck is coming.
Passengers wait in a Transportation Security Administration line at JFK airport on Jan. 09, 2019 in New York City. Its been reported that hundreds of TSA screeners and agents have called in sick from their shifts from a number of major airports as the partial government shutdown continues. Employees of the TSA, whose job it is to keep airlines safe, are being forced to work without knowing when their next paycheck is coming. Spencer Platt, Getty Images>FullscreenU.S. Senate Minoirty Leader Sen. Chuck Schumer (D-NY) returns to the U.S. Capitol from a meeting at the White House January 9, 2019 in Washington, DC.
U.S. Senate Minoirty Leader Sen. Chuck Schumer (D-NY) returns to the U.S. Capitol from a meeting at the White House January 9, 2019 in Washington, DC. Alex Wong, Getty Images>FullscreenHouse Minority Leader Kevin McCarthy of Calif., left, listens as Vice President Mike Pence, right, speaks to reporters following a meeting with President Donald Trump and Democratic congressional leaders at the White House in Washington, Wednesday, Jan. 9, 2019.
House Minority Leader Kevin McCarthy of Calif., left, listens as Vice President Mike Pence, right, speaks to reporters following a meeting with President Donald Trump and Democratic congressional leaders at the White House in Washington, Wednesday, Jan. 9, 2019. Susan Walsh, AP>FullscreenHouse Majority Leader Steny Hoyer, D-Md., holds his notes as he talks with reporters following a meeting with Congressional leaders and President Donald Trump at the White House in Washington, Wednesday, Jan. 9, 2019.
House Majority Leader Steny Hoyer, D-Md., holds his notes as he talks with reporters following a meeting with Congressional leaders and President Donald Trump at the White House in Washington, Wednesday, Jan. 9, 2019. Susan Walsh, AP>FullscreenHouse Speaker Nancy Pelosi of Calif., center, speaks about her oath of office as she stands next to Senate Minority Leader Sen. Chuck Schumer of N.Y., left, and Sen. Dick Durbin, D-Ill., right, following their meeting with President Donald Trump at the White House in Washington, Wednesday, Jan. 9, 2019.
House Speaker Nancy Pelosi of Calif., center, speaks about her oath of office as she stands next to Senate Minority Leader Sen. Chuck Schumer of N.Y., left, and Sen. Dick Durbin, D-Ill., right, following their meeting with President Donald Trump at the White House in Washington, Wednesday, Jan. 9, 2019. Susan Walsh, AP>FullscreenPresident Donald Trump, accompanied by Vice President Mike Pence, Senate Majority Leader Mitch McConnell, R-Ky., talks to the media after a Senate Republican policy lunch on Capitol Hill, Wednesday, Jan. 9, 2018, in Washington.
President Donald Trump, accompanied by Vice President Mike Pence, Senate Majority Leader Mitch McConnell, R-Ky., talks to the media after a Senate Republican policy lunch on Capitol Hill, Wednesday, Jan. 9, 2018, in Washington. Jose Luis Magana, AP>FullscreenSenate Majority Leader Mitch McConnell of Ky., listens as President Donald Trump talks to the media after a Senate Republican policy lunch on Capitol Hill, Wednesday, Jan. 9, 2018, in Washington.
Senate Majority Leader Mitch McConnell of Ky., listens as President Donald Trump talks to the media after a Senate Republican policy lunch on Capitol Hill, Wednesday, Jan. 9, 2018, in Washington. Evan Vucci, AP>FullscreenA "Closed" sign is seen during a news conference after a House Democratic Caucus meeting at the U.S. Capitol Jan. 9, 2019 in Washington, DC. House Democrats gathered to discuss the Democratic agenda as the partial government shutdown enters day 19.
A "Closed" sign is seen during a news conference after a House Democratic Caucus meeting at the U.S. Capitol Jan. 9, 2019 in Washington, DC. House Democrats gathered to discuss the Democratic agenda as the partial government shutdown enters day 19. Alex Wong, Getty Images>FullscreenActivists hold a lit "FAKE CRISIS" sign as they stage a protest outside the White House in response to U.S. President Donald Trumps prime time address to the nation Jan. 8, 2019 in Washington, DC. President Trump urged Congress to fund $5.7 billion for a border wall.
Activists hold a lit "FAKE CRISIS" sign as they stage a protest outside the White House in response to U.S. President Donald Trumps prime time address to the nation Jan. 8, 2019 in Washington, DC. President Trump urged Congress to fund $5.7 billion for a border wall. Alex Wong, Getty Images>FullscreenThe Washington skyline is seen on day 19 of a partial government shutdown on the morning after President Donald Trump used a prime-time TV address from the Oval Office to urge congressional Democrats to relent on their opposition to his proposed U.S.-Mexico border wall, Wednesday, Jan. 9, 2019. From left are the Lincoln Memorial, the Washington Monument, and the U.S. Capitol.
The Washington skyline is seen on day 19 of a partial government shutdown on the morning after President Donald Trump used a prime-time TV address from the Oval Office to urge congressional Democrats to relent on their opposition to his proposed U.S.-Mexico border wall, Wednesday, Jan. 9, 2019. From left are the Lincoln Memorial, the Washington Monument, and the U.S. Capitol. J. Scott Applewhite, AP>FullscreenThe entrance to Fort Point National Historic Site, a masonry seacoast fortification located on the southern side of the Golden Gate Bride, a popular tourist site is closed in San Francisco, Calif. on Jan. 8, 2019.
The entrance to Fort Point National Historic Site, a masonry seacoast fortification located on the southern side of the Golden Gate Bride, a popular tourist site is closed in San Francisco, Calif. on Jan. 8, 2019. John G. Mabanglo, EPA-EFE>FullscreenMembers of American Legion Post 416 watch President Donald Trump speak on Jan. 8, 2019 in Encinitas, California.  The president spoke in his first prime-time address from the Oval Office in an effort to build support for $5.7 billion in funding for a border wall.
Members of American Legion Post 416 watch President Donald Trump speak on Jan. 8, 2019 in Encinitas, California. The president spoke in his first prime-time address from the Oval Office in an effort to build support for $5.7 billion in funding for a border wall. Sandy Huffaker, Getty Images>FullscreenPeople walk past a sign announcing that New York funds are keeping the Statue of Liberty and Ellis Island open for visitors on Jan. 5, 2019, in New York, as the US government shutdown enters its third week.
People walk past a sign announcing that New York funds are keeping the Statue of Liberty and Ellis Island open for visitors on Jan. 5, 2019, in New York, as the US government shutdown enters its third week. Don Emmert, AFP/Getty Images>FullscreenVice President Mike Pence, left, White House legislative affairs aide Ja'Ron Smith, Homeland Security Secretary Kirstjen Nielsen, second row left, White House Senior Adviser Jared Kushner, and others, walk down the steps of the Eisenhower Executive Office building, on the White House complex, after a meeting with staff members of House and Senate leadership, Saturday, Jan. 5, 2019, in Washington.
Vice President Mike Pence, left, White House legislative affairs aide Ja'Ron Smith, Homeland Security Secretary Kirstjen Nielsen, second row left, White House Senior Adviser Jared Kushner, and others, walk down the steps of the Eisenhower Executive Office building, on the White House complex, after a meeting with staff members of House and Senate leadership, Saturday, Jan. 5, 2019, in Washington. Alex Brandon, AP>FullscreenThe Smithsonian Institution National Air and Space Museum is closed during the partial government shutdown, Friday, Jan. 4, 2019 in Washington.
The Smithsonian Institution National Air and Space Museum is closed during the partial government shutdown, Friday, Jan. 4, 2019 in Washington. Alex Brandon, AP>FullscreenWorkmen from the commercial cleanup company 1-800-GOT-JUNK clean up trash on The Ellipse, south of the White House, in Washington, DC on Jan. 4, 2019. As the company donates its resources to clean up, US President Donald J. Trump is scheduled to meet at the White House with congressional leadership in hopes of ending the partial government shutdown now in its 12th day.
Workmen from the commercial cleanup company 1-800-GOT-JUNK clean up trash on The Ellipse, south of the White House, in Washington, DC on Jan. 4, 2019. As the company donates its resources to clean up, US President Donald J. Trump is scheduled to meet at the White House with congressional leadership in hopes of ending the partial government shutdown now in its 12th day. Shawn Thew, EPA-EFE>FullscreenEmma James, right, and co-worker Vincent Cuenca demonstrate outside the Federal Center on Goodfellow Boulevard, Friday, Jan. 4, 2019 in St. Louis.  James is a processor in the multifamily housing division. Cuenta processes payments to FEMA contractors.
Emma James, right, and co-worker Vincent Cuenca demonstrate outside the Federal Center on Goodfellow Boulevard, Friday, Jan. 4, 2019 in St. Louis. James is a processor in the multifamily housing division. Cuenta processes payments to FEMA contractors. Christian Gooden, St. Louis Post-Dispatch via AP>FullscreenPresident Donald J. Trump holds a news conference beside US Vice President Mike Pence, left,, Republican Representative from Louisiana Steve Scalise (2-R) and House Minority Leader Republican Kevin McCarthy, right, in the Rose Garden of the White House in Washington, DC on Jan. 4, 2019. President Trump discussed a variety of topics, particularly his meeting with Congressional Democratic and Republican leaders for negotiations on the ongoing partial shutdown of the federal government. A partial shutdown of the government continues since Congress and Trump failed to strike a deal on border security before a 22 December 22, 2018 funding deadline.
President Donald J. Trump holds a news conference beside US Vice President Mike Pence, left,, Republican Representative from Louisiana Steve Scalise (2-R) and House Minority Leader Republican Kevin McCarthy, right, in the Rose Garden of the White House in Washington, DC on Jan. 4, 2019. President Trump discussed a variety of topics, particularly his meeting with Congressional Democratic and Republican leaders for negotiations on the ongoing partial shutdown of the federal government. A partial shutdown of the government continues since Congress and Trump failed to strike a deal on border security before a 22 December 22, 2018 funding deadline. Michael Reynolds, EPA-EFE>FullscreenVolunteer Alexandra Degen cleans a restroom at Joshua Tree National Park on Jan. 4, 2019 in Joshua Tree National Park, California. Volunteers with 'Friends of Joshua Tree National Park' have been cleaning bathrooms and trash at the park as the park is drastically understaffed during the partial government shutdown. Campgrounds and some roads have been closed at the park due to safety concerns.
Volunteer Alexandra Degen cleans a restroom at Joshua Tree National Park on Jan. 4, 2019 in Joshua Tree National Park, California. Volunteers with 'Friends of Joshua Tree National Park' have been cleaning bathrooms and trash at the park as the park is drastically understaffed during the partial government shutdown. Campgrounds and some roads have been closed at the park due to safety concerns. Mario Tama, Getty Images>FullscreenDemocratic Speaker of the House Nancy Pelosi returns to the US Capitol after a meeting with US President Donald Trump over the ongoing partial government shutdown in Washington, DC on Jan. 4, 2019. Though Democrats called the meeting 'contentious,' President Trump said the meeting was 'productive'.
Democratic Speaker of the House Nancy Pelosi returns to the US Capitol after a meeting with US President Donald Trump over the ongoing partial government shutdown in Washington, DC on Jan. 4, 2019. Though Democrats called the meeting 'contentious,' President Trump said the meeting was 'productive'. Jim Lo Scalzo, EPA-EFE>FullscreenSigns announce the visitor center at the DeSoto National Wildlife Refuge in Missouri Valley, Iowa, is closed, Friday, Jan. 4, 2019, as the partial government shutdown continues.
Signs announce the visitor center at the DeSoto National Wildlife Refuge in Missouri Valley, Iowa, is closed, Friday, Jan. 4, 2019, as the partial government shutdown continues. Nati Harnik, AP>FullscreenBrandon Torres, center, the Branch Chief of Emergency Services at Grand Canyon National Park, directs guests in the park on Jan. 4, 2019.
Brandon Torres, center, the Branch Chief of Emergency Services at Grand Canyon National Park, directs guests in the park on Jan. 4, 2019. Thomas Hawthorne, The Republic via USA TODAY Network>FullscreenA sign blocks a snowed in walk way at Grand Canyon National Park on Jan. 4, 2019. The park was staffed at minimum capacity due to the government shutdown but retained much of its services due to an executive order issued by Arizona Governor Doug Ducey to run the park with state funds in the event of a shutdown.
A sign blocks a snowed in walk way at Grand Canyon National Park on Jan. 4, 2019. The park was staffed at minimum capacity due to the government shutdown but retained much of its services due to an executive order issued by Arizona Governor Doug Ducey to run the park with state funds in the event of a shutdown. Thomas Hawthorne, The Republic via USA TODAY Network>FullscreenThe Capitol building is visible as a man throws garbage away during a partial government shutdown on the National Mall in Washington, Tuesday, Dec. 25, 2018. Trash cans on the Mall are not being emptied during the shutdown.
The Capitol building is visible as a man throws garbage away during a partial government shutdown on the National Mall in Washington, Tuesday, Dec. 25, 2018. Trash cans on the Mall are not being emptied during the shutdown. Andrew Harnik, AP>FullscreenA sign is posted on a fence near an entrance to the Bunker Hill Monument, Monday, Dec. 24, 2018, in Boston. The historic site, erected to commemorate the Revolutionary War Battle of Bunker Hill, and run by the National Park Service, was closed Monday due to a partial federal government shutdown. The federal government is expected to remain partially closed past Christmas Day in a protracted standoff over President Donald Trump's demand for money to build a border wall with Mexico.
A sign is posted on a fence near an entrance to the Bunker Hill Monument, Monday, Dec. 24, 2018, in Boston. The historic site, erected to commemorate the Revolutionary War Battle of Bunker Hill, and run by the National Park Service, was closed Monday due to a partial federal government shutdown. The federal government is expected to remain partially closed past Christmas Day in a protracted standoff over President Donald Trump's demand for money to build a border wall with Mexico. Steven Senne, AP>FullscreenThe empty U.S. Capitol Rotunda is seen in Washington during a partial government shutdown Monday, Dec. 24, 2018. Both sides in the long-running fight over funding President Donald Trump's U.S.-Mexico border wall appear to have moved toward each other, but a shutdown of one-fourth of the federal government entered Christmas without a clear resolution in sight.
The empty U.S. Capitol Rotunda is seen in Washington during a partial government shutdown Monday, Dec. 24, 2018. Both sides in the long-running fight over funding President Donald Trump's U.S.-Mexico border wall appear to have moved toward each other, but a shutdown of one-fourth of the federal government entered Christmas without a clear resolution in sight. Manuel Balce Ceneta, AP>FullscreenSenate Majority Leader, Republican Mitch McConnell, center, is surrounded by reporters after leaving the Senate chamber at the US Capitol in Washington, DC on Dec. 22, 2018.
Senate Majority Leader, Republican Mitch McConnell, center, is surrounded by reporters after leaving the Senate chamber at the US Capitol in Washington, DC on Dec. 22, 2018. Erik S. Lesser, EPA-EFE>FullscreenSenate Minority Leader Chuck Schumer, D-N.Y., is met by reporters as he arrives at the Capitol on the first morning of a partial government shutdown, as Democratic lawmakers, and some Republicans, are at odds with President Donald Trump on spending for his border wall, in Washington, Saturday, Dec. 22, 2018.
Senate Minority Leader Chuck Schumer, D-N.Y., is met by reporters as he arrives at the Capitol on the first morning of a partial government shutdown, as Democratic lawmakers, and some Republicans, are at odds with President Donald Trump on spending for his border wall, in Washington, Saturday, Dec. 22, 2018. J. Scott Applewhite, AP>FullscreenJamie Parrish, from Minneapolis, takes a selfie in front of the closed sign at the National Archives, Saturday, Dec. 22, 2018 in Washington. The House and Senate are gaveling back in for a rare weekend session amid a partial government shutdown over President Donald Trump's demand for billions of dollars for a border wall.
Jamie Parrish, from Minneapolis, takes a selfie in front of the closed sign at the National Archives, Saturday, Dec. 22, 2018 in Washington. The House and Senate are gaveling back in for a rare weekend session amid a partial government shutdown over President Donald Trump's demand for billions of dollars for a border wall. Alex Brandon, AP>FullscreenA sign alerts visitors to the closure of the White House Visitor Center on the first day of a partial government shutdown in Washington, DC on Dec. 22, 2018.
A sign alerts visitors to the closure of the White House Visitor Center on the first day of a partial government shutdown in Washington, DC on Dec. 22, 2018. Jim Lo Scalzo, EPA-EFE>FullscreenThe US Capitol on the first morning of a partial government shutdown in Washington, DC on Dec. 22, 2018. Earlier in the week, President Trump rejected a Senate-passed continuing resolution to fund the federal government because it did not include money for his border wall. Though President Trump said he was 'proud' to shut the government down, lawmakers will meet again today to negotiate a way around the stalemate.
The US Capitol on the first morning of a partial government shutdown in Washington, DC on Dec. 22, 2018. Earlier in the week, President Trump rejected a Senate-passed continuing resolution to fund the federal government because it did not include money for his border wall. Though President Trump said he was 'proud' to shut the government down, lawmakers will meet again today to negotiate a way around the stalemate. Jim Lo Scalzo, EPA-EFE>FullscreenSenate Majority Leader Republican Mitch McConnell, center, is followed by members of the news media as he walks from the Senate floor on Capitol Hill in Washington, DC, on Dec. 21, 2018. President Trump rejected a continuing resolution to fund the federal government through Feb. 8, 2019, threatening a partial shutdown unless funding is included for his border wall.
Senate Majority Leader Republican Mitch McConnell, center, is followed by members of the news media as he walks from the Senate floor on Capitol Hill in Washington, DC, on Dec. 21, 2018. President Trump rejected a continuing resolution to fund the federal government through Feb. 8, 2019, threatening a partial shutdown unless funding is included for his border wall. MICHAEL REYNOLDS/EPA-EFE>FullscreenVice President Mike Pence, right, acting White House Chief of Staff Mick Mulvaney, center, and Senior Advisor to US President Donald J. Trump, Jared Kushner, left, walk from the House of Representatives to the Senate at the US Capitol on Friday.
Vice President Mike Pence, right, acting White House Chief of Staff Mick Mulvaney, center, and Senior Advisor to US President Donald J. Trump, Jared Kushner, left, walk from the House of Representatives to the Senate at the US Capitol on Friday. ERIK S. LESSER/EPA-EFE>FullscreenOutgoing Speaker of the House Paul Ryan (R-WI) (C) returns to his office after votes in the U.S. Capitol, Friday. The U.S. Senate considered a budget bill passed Thursday by the House of Representatives that would fund the federal government and includes more than $500 million for a wall along the U.S.-Mexico border. The Senate is unlikely to pass the bill with the wall funding, moving the government closer to a partial shut down just days before the Christmas holiday.
Outgoing Speaker of the House Paul Ryan (R-WI) (C) returns to his office after votes in the U.S. Capitol, Friday. The U.S. Senate considered a budget bill passed Thursday by the House of Representatives that would fund the federal government and includes more than $500 million for a wall along the U.S.-Mexico border. The Senate is unlikely to pass the bill with the wall funding, moving the government closer to a partial shut down just days before the Christmas holiday. Chip Somodevilla/Getty Images>FullscreenHouse Democratic Leader Nancy Pelosi of California, the speaker-designate for the new Congress, and Senate Minority Leader Chuck Schumer, D-N.Y., leave after talking to reporters as a revised spending bill is introduced in the House that includes $5 billion demanded by President Donald Trump for a wall along the U.S.-Mexico border, as Congress tries to avert a partial shutdown, in Washington, on Dec. 20, 2018.
House Democratic Leader Nancy Pelosi of California, the speaker-designate for the new Congress, and Senate Minority Leader Chuck Schumer, D-N.Y., leave after talking to reporters as a revised spending bill is introduced in the House that includes $5 billion demanded by President Donald Trump for a wall along the U.S.-Mexico border, as Congress tries to avert a partial shutdown, in Washington, on Dec. 20, 2018. J. Scott Applewhite/AP>FullscreenDemocratic House Minority Leader Nancy Pelosi (R) and Democratic Senate Minority Leader Chuck Schumer (C) speak to the media, Thursday, as lawmakers prepare to vote on a new budget resolution to avert a government shutdown.
Democratic House Minority Leader Nancy Pelosi (R) and Democratic Senate Minority Leader Chuck Schumer (C) speak to the media, Thursday, as lawmakers prepare to vote on a new budget resolution to avert a government shutdown. JIM LO SCALZO/EPA-EFE>FullscreenRepublican Majority Whip from California Kevin McCarthy (C) leaves the Capitol, Thursday, for the White House to negotiate a budget vote to avert a government shutdown in the US Capitol. The Senate passed a continuing resolution on Wednesday, to keep the government open until February 2019. Others are not identified members of the media.
Republican Majority Whip from California Kevin McCarthy (C) leaves the Capitol, Thursday, for the White House to negotiate a budget vote to avert a government shutdown in the US Capitol. The Senate passed a continuing resolution on Wednesday, to keep the government open until February 2019. Others are not identified members of the media. JIM LO SCALZO/EPA-EFE>FullscreenChairman of the Senate Committee on Appropriations Republican Richard Shelby (C) speaks to members of the news media shortly before leaving to attend a meeting at the White House held by US President Donald J. Trump, on Capitol Hill, Friday. President Trump rejected a continuing resolution to fund the federal government through 08 February 2019, threatening a partial shutdown unless funding is included for his border wall.
Chairman of the Senate Committee on Appropriations Republican Richard Shelby (C) speaks to members of the news media shortly before leaving to attend a meeting at the White House held by US President Donald J. Trump, on Capitol Hill, Friday. President Trump rejected a continuing resolution to fund the federal government through 08 February 2019, threatening a partial shutdown unless funding is included for his border wall. MICHAEL REYNOLDS/EPA-EFE>FullscreenSpeaker of the House Paul Ryan (R-WI) makes a statement to the press after a meeting with US President Donald Trump at the White House Thursday.
Speaker of the House Paul Ryan (R-WI) makes a statement to the press after a meeting with US President Donald Trump at the White House Thursday. BRENDAN SMIALOWSKI/AFP/Getty Images>FullscreenHouse Majority Leader Kevin McCarthy of Calif., center, accompanied by House Speaker Paul Ryan of Wis., center right, speaks to reporters outside the West Wing of the White House following a meeting with President Donald Trump on border security.
House Majority Leader Kevin McCarthy of Calif., center, accompanied by House Speaker Paul Ryan of Wis., center right, speaks to reporters outside the West Wing of the White House following a meeting with President Donald Trump on border security. Andrew Harnik/AP>FullscreenSenate Majority Leader Republican Mitch McConnell arrives at the Senate Carriage entrance upon returning from the White House where he attended a meeting held by President Donald J. Trump, on Friday. President Trump rejected a continuing resolution to fund the federal government through February 8, 2019, threatening a partial shutdown unless funding is included for his border wall.
Senate Majority Leader Republican Mitch McConnell arrives at the Senate Carriage entrance upon returning from the White House where he attended a meeting held by President Donald J. Trump, on Friday. President Trump rejected a continuing resolution to fund the federal government through February 8, 2019, threatening a partial shutdown unless funding is included for his border wall. MICHAEL REYNOLDS/EPA-EFE>Fullscreen

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    Still, it said in a news release late last week, “Evidence of greater dysfunction in fiscal policymaking could still contribute to negative pressure on the U.S. rating. This is especially the case as deficits continue to increase.”

    The chief concern is that without an increase in the country’s ability to borrow, the U.S. would not be able to meet many of its financial obligations, particularly paying interest to its bondholders.

    Any standoff in Congress over the debt ceiling is months away. The deadline to raise the debt limit is formally in March but the Treasury Department can use extraordinary measures to extend that by several months.  

    More: Government shutdown 2019: Homebuyers with USDA mortgages can't close on house sales

    More: From California to New York, states are raising minimum wages in 2019 for 17 million workers

    More: Crash safety to craft beer: Shutdown impacts Americans in surprising ways

    In 2011, Standard & Poor’s lowered the U.S. credit rating even after Congress reached a last-minute deal to raise the debt ceiling. It cited the political brinkmanship that preceded the agreement and a lack of confidence in lawmakers’ ability to reduce the federal deficit over the longer term.

    Here’s how a drop in the nation’s credit rating could affect interest rates, markets and the economy:

    Raise government borrowing costs

     A lower rating, whether based on a failure to raise the debt ceiling or the threat of such an event, could boost interest rates on Treasurys, increasing government borrowing costs and further swelling the federal debt.

    In 2011, however, the downgrade didn’t push up Treasury rates because Treasurys were still viewed as a relatively safe investment in an uncertain global climate highlighted by the European debt crisis. In fact, the yield on a 10-year Treasury fell from 2.56 percent to 2.32 percent after the downgrade.

    Increase borrowing costs for consumers, firms 

    Treasury bonds are used to set rates for assets such as 30-year fixed mortgages and corporate bonds.

    “It’s still the benchmark for most borrowing by businesses and households,” says Nancy Vanden Houten, senior economist at Oxford Economics. Higher rates can discourage borrowing and hurt the economy.

    Uncertainty about the government’s ability to spend also stirs worries about the economy, which itself can increase corporate borrowing costs, says Joel Prakken, chief U.S. economist of Macroeconomic Advisers.

    Raise costs for states and local governments

    Interest rates on many of their obligations are similarly pegged to Treasurys.

    Clobber markets

    On the first business day after Standard & Poor’s cut the country’s triple-A rating in 2011, the Dow fell 5.5 percent. Still, it ended 2011 up 5.5 percent for the year.

    Douse consumer and business confidence

    Both volatile markets and concerns about whether the government can be funded can undermine the outlook. Consumer confidence fell more than 20 percent during the 2011 standoff in Congress.

    Contributing: Janna Herron

    CLOSE

    Speaker Ryan ‘not worried’ about debt ceiling despite pressure from President Trump to force funding for border wall. (Aug. 24) AP

     

    Source : https://www.usatoday.com/story/money/2019/01/10/government-shutdown-how-cut-us-credit-rating-could-hurt-economy/2531691002/

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