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Top Credit Ratings Agency: GOP Tax Plan Will Hike Deficits, Put US Credit Rating At Risk

DEMOCRACY

Top Credit Ratings Agency: GOP Tax Plan Will Hike Deficits, Put US Credit Rating At Risk




The GOP tax plan will increase the deficit, produce little growth, and put the country’s credit rating and borrowing costs at risk during the next recession, according to an analysis by credit ratings agency Fitch.

“Tax cuts may lead to a short-lived boost to output, but Fitch believes that they will not pay for themselves or lead to a permanently higher growth rate,” the analysis said.

Fitch said it expected U.S. GDP growth to peak in 2018 before dropping down to 2.2 percent in 2019.

This report comes after claims by the Trump administration that its tax reform proposals would lead to sustained economic growth of 3 percent a year, and therefore covering and possibly even bringing down the deficit.




The Hill added:

The ratings agency also said that the additional deficits brought on by the tax bill would leave the U.S. exposed when the next economic downturn hit. Policymakers often try to stimulate the economy with tax cuts and deficit spending when recessions hit. An already-deep deficit leaves them with fewer options, and could put the country’s credit rating and borrowing costs at risk, when a downturn hits.

“The U.S. is the most indebted ‘AAA’ country and it is running the loosest fiscal stance. Long-term debt dynamics are also more negative than those of peers, with health and social security spending commitments set to rise over the next decade,” the report said, calling the impact “revenue negative.”



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