USD2T Deficit: Fitch Says Midterms Will Not Fix US Debt Spiral
(MENAFN) Fitch warned on Wednesday that America’s fiscal strain will persist whichever party prevails in the upcoming midterm elections, as surging entitlement outlays and mounting interest costs push government debt higher.
In a new report, the ratings firm said a Democratic takeover of one or both chambers of Congress could raise the odds of showdowns over the federal debt ceiling and government funding, adding pressure to an already sizable deficit.
Even so, Fitch stressed that the forces driving the US fiscal outlook would not depend on who controls Congress. It identified growing entitlement spending and debt-servicing costs as the central threats.
Absent a change in policy, those structural pressures are likely to erode the country’s debt-to-gross domestic product (GDP) ratio further, the agency said.
The federal budget deficit reached nearly $2 trillion in fiscal 2026, or 6.1% of GDP, according to Fitch.
The firm projects the general government deficit, which also counts state and local government balances, will widen to 7.5% of GDP in 2026 and 7.6% in 2027. State and local balances make up roughly 1% of GDP.
A shortfall of that size would be the largest among sovereigns in the ‘AA’ rating category, Fitch said.
The agency added that the fiscal agendas of both major parties could deepen budgetary strain unless matched by offsetting measures.
In a new report, the ratings firm said a Democratic takeover of one or both chambers of Congress could raise the odds of showdowns over the federal debt ceiling and government funding, adding pressure to an already sizable deficit.
Even so, Fitch stressed that the forces driving the US fiscal outlook would not depend on who controls Congress. It identified growing entitlement spending and debt-servicing costs as the central threats.
Absent a change in policy, those structural pressures are likely to erode the country’s debt-to-gross domestic product (GDP) ratio further, the agency said.
The federal budget deficit reached nearly $2 trillion in fiscal 2026, or 6.1% of GDP, according to Fitch.
The firm projects the general government deficit, which also counts state and local government balances, will widen to 7.5% of GDP in 2026 and 7.6% in 2027. State and local balances make up roughly 1% of GDP.
A shortfall of that size would be the largest among sovereigns in the ‘AA’ rating category, Fitch said.
The agency added that the fiscal agendas of both major parties could deepen budgetary strain unless matched by offsetting measures.
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