By Staff, Agencies

The United States is likely to face sustained fiscal pressures regardless of the outcome of the upcoming midterm elections, as rising entitlement spending and debt-servicing costs threaten to drive government debt higher, Fitch Ratings warned Wednesday.

In a report, the credit rating agency said Democratic control of one or both chambers of Congress could increase the risk of political standoffs over the federal debt ceiling and government funding, potentially placing additional strain on the country’s already substantial fiscal deficit.

However, Fitch stressed that the fundamental challenges facing the US fiscal outlook would remain regardless of which party controls Congress, highlighting growing entitlement expenditures and rising debt-servicing costs as major sources of concern.

Without policy adjustments, these structural pressures are likely to further worsen the country’s debt-to-gross domestic product [GDP] ratio, the agency said.

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

The agency projects that the general government deficit, which includes the fiscal balances of federal, 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 approximately 1% of GDP.

Fitch warned that a deficit of this magnitude would be the highest among sovereigns carrying ratings in the ‘AA’ category.

The agency also cautioned that the budgetary priorities of both major political parties could add to fiscal pressures unless accompanied by offsetting measures.

The report underscores the structural nature of the challenges confronting US public finances, suggesting that the country’s fiscal trajectory will depend not only on the outcome of the midterm elections but also on the policy decisions taken to address spending commitments, borrowing costs and the widening deficit.