With all the hoopla and rush to increase the national debt limit with cries that if Congress doesn’t act fast, the rating agencies may downgrade our credit rating, a Chinese rating agency downgraded the U.S. credit rating anyway.
Dagong lowered its ratings for the United States from A to A-, because it submits the possibility of a default exists despite resolving the Congressional deadlock, according to France24.
The rating agency made its announcement after the bill was passed and President Barack Obama signed it into law.
“The fundamental situation that the debt growth rate significantly outpaces that of fiscal income and gross domestic product remains unchanged,” Dagong said in the statement.
While the national debt has soared in the last five years, growth has been sluggish at best. Paying off old debt with new — by issuing new bonds — can only be a temporary stopgap measure at best, not a continued way of doing business.
“Hence the government is still approaching the verge of default crisis, a situation that cannot be substantially alleviated in the foreseeable future,” it said.
Dagong made headlines in August 2011 when it lowered its main rating for US sovereign debt after Congress passed an earlier bill to raise Washington’s debt ceiling.
The agency, which is far less prominent than long-established Western competitors including Moody’s, Fitch and Standard and Poor’s, has been working to further raise its profile.
The agency made the downgrade despite Beijing stating that Congress’s resolution would contribute to financial stability throughout the world. It should also be noted that Dagong’s ratings have been criticized in the past, and its downgrade will not likely affect the markets.