A similar move by Fitch or Moody’s would drop the U.S. from a small club of the world’s highest-rated lenders. (Many investors still consider the United States triple-A because it’s rated by two or three authorities.) Moody’s gives its Aaa rating to only 12 countries, and a downgrade would put the U.S. one category below the likes of Germany. , Singapore and Canada.
Even without default, the US position could suffer. Mr. Foster said that passing the so-called X-date — when the government runs out of money to pay all bills that are due as soon as June 1, according to the Treasury — would be enough to reduce Moody’s “outlook.” The country’s rating indicates an opinion on the direction of the borrower’s rating, similar to the step taken by Fitch on Wednesday.
Even a temporary agreement to suspend the credit limit for a short period of time may not be enough to motivate the rating agencies. A spokesman for Fitch said a short-term deal would “only buy time” instead of raising the debt ceiling in the long term.
“Developments will be the focus of Fitch’s rating review in the coming days,” the spokesperson said.
The US benefits from its central role in the global economy, with the dollar being the dominant currency in global trade and US government debt being the world’s largest debt market. Doubts about its creditworthiness could scare off foreign investors and governments that are major holders of U.S. debt, threaten the country’s ability to finance itself as favorably as in the past, and even undermine its international standing.
“That’s not good for America,” Indonesia’s finance minister, Sri Mulyani Indravati, told a recent meeting of world finance leaders.
As the debt-ceiling impasse continues, Mr. Foster refused.
“We can’t talk about our discussions with issuers, including governments, but we do have discussions throughout the year, sometimes more frequently depending on what’s going on in a particular country at a time,” said Mr. Foster said. “We always have an open channel with those governments, including the US.”