US fiscal pressures to persist regardless of midterm election outcome: Fitch

By Diyar Guldogan

WASHINGTON (AA) - The US is likely to face continued fiscal pressures regardless of the outcome of the upcoming midterm elections, with rising entitlement spending and debt-servicing costs threatening to push government debt higher, Fitch Ratings said Wednesday.

In a report, the credit rating agency warned that Democratic control of one or both chambers of Congress could increase the likelihood of political brinkmanship over the federal debt ceiling and government funding, potentially putting further pressure on the country's already-large fiscal deficit.

However, Fitch said the underlying drivers of the US fiscal outlook would persist regardless of which party controls Congress, pointing to rising entitlement expenditures and debt-servicing costs as key challenges.

Without policy changes, these structural pressures are likely to lead to a further deterioration in the country's debt-to-gross domestic product (GDP) ratio, the agency said.

The US federal budget deficit reached nearly $2 trillion, equivalent to 6.1% of GDP, in fiscal 2026, according to Fitch.

The agency forecasts that the general government deficit, which includes the balances of state and local governments, will widen to 7.5% of GDP in 2026 and 7.6% in 2027. State and local government balances account for around 1% of GDP.

Such a deficit would be the highest among sovereigns rated in the 'AA' category, Fitch said.

The agency also warned that the fiscal priorities of both major political parties could add to budgetary pressures unless offset by other measures.

Diyar Güldoğan