Fitch Downgrades US Rating
Fitch Ratings, one of the three largest credit rating agencies in the U.S., downgraded the United States’ long-term foreign-currency issuer default rating from AAA to AA+. The rating downgrade reflects the expected fiscal deterioration over the next three years and the high and growing general government debt burden. Fitch also highlighted the erosion of governance relative to ‘AA’ and ‘AAA’ rated peers over the last two decades. The repeated debt-limit standoffs and last-minute resolutions have eroded confidence in fiscal management. Fitch expects the general government deficit to rise to 6.3% of GDP in 2023.
White House, Biden Officials, and Yellen Disagree
Following the rating downgrade, officials from the Biden administration disagreed with Fitch’s decision and blamed the governance issues on former President Donald Trump’s administration. The White House and Treasury Secretary Janet Yellen released statements expressing their strong disagreement with the downgrade. They argued that Fitch’s decision was arbitrary and based on outdated data. They highlighted the progress made under the Biden administration, including bipartisan legislation to address the debt limit and invest in infrastructure.
Hot Take
The downgrade of the US rating by Fitch has sparked a disagreement between the Biden administration and the rating agency. While Fitch points to fiscal deterioration and governance issues, officials from the Biden administration argue that these problems were inherited from the previous administration. The differing perspectives highlight the political nature of credit ratings and the importance of taking them with a grain of salt. Ultimately, the impact of the downgrade on the US economy and markets remains to be seen.
By
By
By
By
By