OREANDA-NEWS. Relatively modest fiscal adjustment could stabilize the US's debt/GDP ratio, but this would require a renewed political impetus towards consolidation after November's elections, or faster growth than we currently forecast, Fitch Ratings says. As neither appears likely at present, the debt/GDP ratio will likely trend upwards and the public finances will remain vulnerable in the case of an economic slowdown.

We project general government debt/GDP to rise by 8pp of GDP through 2025, from an estimated 101.6% of GDP this year. Our projections reflect a forecast rise in mandatory spending in areas such as Social Security and healthcare, and the fact that medium-term growth prospects are constrained by labor force and productivity growth.

Federal deficit reduction has halted following the sharp drop from FY2009 to FY2015. Whether it resumes will partly depend on the outcome of November's elections. The presidential candidates have taken contrasting fiscal stances. Hillary Clinton would represent broad continuity. Donald Trump's economic policy platform is evolving, but advocacy of tax cuts without reforms to entitlement spending, would boost short-term growth but result in much higher deficits.

However, we think Congress is unlikely to approve radical tax cutting or spending proposals. If the Democrats regain a Senate majority, and the House remains in Republican hands, as seems likely, divided government could hamper bipartisan cooperation.

Our growth forecasts suggest that debt/GDP will rise only gradually, but with deficit reduction on hold, the US's debt trajectory is more exposed to unexpected economic weakness than in recent years. Higher-than-anticipated growth would benefit the public finances.

While the US's unparalleled financing flexibility and a large, rich, diverse economy give the US higher debt tolerance than 'AAA' peers, high public debt is a ratings weakness.