Fitch Ratings Downgrades United States Long-Term Credit Rating from AAA to AA+

Fitch Ratings Downgrades the United States’ Credit Rating

Fitch Ratings, one of the world’s leading credit rating agencies, has downgraded the United States’ Long-Term Foreign-Currency Issuer Default Rating (IDR) from AAA to AA+. This downgrade has raised concerns and sparked criticism from the U.S. Treasury Department and the White House.

Reasons for the Downgrade

Fiscal Deterioration: Fitch attributes the downgrade to expectations of a “fiscal deterioration” in the United States. The government deficit is projected to rise to 6.3% by 2023 due to weaker government revenues, new spending initiatives, and a higher interest burden.
Growing Debt Burden: The nation’s debt-to-GDP ratio is expected to reach 118% by 2025, which is three times higher than the median of AAA-rated countries.
Erosion of Governance: Fitch criticizes the United States for its lack of a medium-term fiscal framework and a complex budgeting process. The repeated debt-limit standoffs and last-minute resolutions have eroded confidence in fiscal management.

Government’s Response

U.S. Treasury Secretary Janet Yellen has criticized Fitch’s downgrade, calling it “arbitrary and based on outdated data.” She believes that there has been progress in economic indicators, including those related to governance.

White House Press Secretary Karine Jean-Pierre has also expressed disagreement with the downgrade, stating that it “defies reality.” She attributes the strong recovery of the U.S. economy to the President’s leadership and blames Republicans for previously supporting a debt default.

Hot Take

Fitch Ratings’ decision to downgrade the United States’ credit rating reflects concerns about the country’s fiscal deterioration and growing debt burden. The lack of a medium-term fiscal framework and a complex budgeting process have further weakened confidence in the government’s fiscal management. While the government has expressed disagreement with the downgrade, it is important for the United States to address these issues and work towards strengthening its financial position.