Fitch lowers US credit rating; Biden officials disagree.
US Credit Rating Lowered by Fitch Ratings
In a significant development, one of the “Big Three” credit agencies, Fitch Ratings, has downgraded the United States’s credit rating. This decision has sparked immediate condemnation from officials in the Biden administration, who strongly disagree with the change.
Fitch Ratings has lowered the country’s Long-Term Foreign-Currency Issuer Default Rating from the top-rated “AAA” to “AA+.” This downgrade could potentially result in higher interest rates and borrowing costs for the United States. It comes after the federal government narrowly avoided a default on its debt earlier this summer and with the possibility of a government shutdown looming if Congress fails to reach a spending agreement for the next fiscal year.
“The rating downgrade of the United States reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance relative to ‘AA’ and ‘AAA’ rated peers over the last two decades that has manifested in repeated debt limit standoffs and last-minute resolutions,” Fitch said in a release.
Fitch has indicated that this downgrade has been a long time coming, citing a steady deterioration in governance standards over the past 20 years. Despite a bipartisan agreement to suspend the debt limit until January 2025, Fitch believes that there have been ongoing issues with fiscal and debt matters.
In addition to these factors, Fitch also mentioned projections that suggest a mild recession for the U.S. economy due to tighter credit conditions, weakening business investment, and a slowdown in consumption.
Treasury Secretary Janet Yellen and the White House have both expressed strong disagreement with Fitch’s decision. Yellen called it arbitrary and based on outdated data, while White House Press Secretary Karine Jean-Pierre criticized Republican officials for their extremism and its impact on the economy.
This downgrade is the first of its kind in over a decade. The last time the U.S. faced such a downgrade was in 2011 when S&P lowered the long-term rating from “AAA” to “AA+.” This decision was made due to political brinkmanship and the increasing debt burden.
Following Fitch’s announcement, Republicans have argued that the downgrade is a consequence of excessive spending and borrowing. They view it as a warning sign that urgent action is needed to address the country’s fiscal situation.
It is clear that this downgrade has significant implications for the United States and its economy. The Biden administration and Congress will need to navigate these challenges and work towards a sustainable financial future for the country.
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