Fitch downgrades US credit rating amid partisan standoffs and ballooning debt
Christian Datoc
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Fitch Ratings downgraded the U.S. credit rating Tuesday following a series of partisan debt standoffs on Capitol Hill.
Fitch announced Tuesday evening that the United States’s “AAA” rating, the highest possible, would be downgraded to “AA+” following this past year’s debt limit showdown, even though a hike was authorized by Congress and President Joe Biden before the July deadline.
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A similar spending showdown is expected to take place in September.
“There has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025,” Fitch wrote in a statement.
The White House said Fitch’s downgrade “defies reality.”
“We strongly disagree with this decision. The ratings model used by Fitch declined under President Trump and then improved under President Biden, and it defies reality to downgrade the United States at a moment when President Biden has delivered the strongest recovery of any major economy in the world,” press secretary Karine Jean-Pierre said in a statement Tuesday night. “And it’s clear that extremism by Republican officials —from cheerleading default, to undermining governance and democracy, to seeking to extend deficit-busting tax giveaways for the wealthy and corporations — is a continued threat to our economy.”
Treasury Secretary Janet Yellen also said she “strongly” disagrees with the decision.
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“I strongly disagree with Fitch Ratings’ decision. The change by Fitch Ratings announced today is arbitrary and based on outdated data. Fitch’s quantitative ratings model declined markedly between 2018 and 2020 — and yet Fitch is announcing its change now, despite the progress that we see in many of the indicators that Fitch relies on for its decision,” she wrote in a statement. “Many of these measures, including those related to governance, have shown improvement over the course of this Administration, with the passage of bipartisan legislation to address the debt limit, invest in infrastructure, and make other investments in America’s competitiveness.”
“President Biden and I are committed to fiscal sustainability. The most recent debt limit legislation included over $1 trillion in deficit reduction and improved our fiscal trajectory,” she closed. “Looking forward, President Biden has put forward a budget that would reduce the deficit by $2.6 trillion over the next decade through a balanced approach that would support investments for the long-term.”