...Debt Dynamics Are Key: United States and Canada are both rated `AAA', but share one credit weakness: a relatively high government debt burden. Debt dynamics are slightly positive in Canada and point to a gradual, medium-term deterioration in the US. US Fiscal Adjustment: The short-term outlook for the US public finances is relatively benign. The US federal budget deficit will shrink further to 2.3% of GDP in FY16, having fallen to 2.5% of GDP in FY15. Both federal and general government debt/GDP have stabilised and should fall in 2016. Debt ceiling tail risks have been dispelled by an agreement to lift the debt ceiling until March 2017. Longer-Term Fiscal Challenges: The debt burden will start to rise again from 2018. A medium-term adjustment to put public debt/GDP on a declining path, increasing US resilience to shocks, faces hurdles in Congress. The US has the world's deepest capital market and few financing constraints ¡ giving it high debt tolerance ¡ but it is the most highly indebted...
