A rating agency downgraded U.S. credit for the second time in the nation's history. Here's what decision could mean for the economy:
Fitch Ratings lowered the country's credit rating to AA+ from AAA, citing the ballooning U.S. debt load and a weakening of governance. On top of that, Fitch expects the U.S. to enter aThe rating downgrade comes months after a federal stalemate delayed auntil days before the U.S. was expected to lose its ability to pay outstanding financial obligations.
Credit-rating decisions like the one issued by Fitch on Tuesday center on a simple dynamic: the nation's capacity to pay off its growing debt.tens of trillions of dollars in debt, requiring the country to make ongoing payments so that it doesn't default on outstanding loans. "The larger our debt becomes and the higher our interest rates are, the more of our federal taxes will go to paying interest on the debt, which isn't creating anything of value for the economy or providing support for Americans," Akabas said.MORE: The stock market has soared this year, but will it last? Experts weigh in
If U.S. debt grows and the government struggles to address it, consumers could face higher interest rates for loans since the nation and its borrowers would be deemed less trustworthy, they added. That would mean higher costs for borrowing for everything from credit cards to mortgages to cars.
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