One of the “Big Three” credit agencies lowered the United States’s rating by a tick on Tuesday, eliciting swift condemnation from Biden administration officials who said they “strongly disagree” with the change.
Fitch Ratings downgraded the country’s Long-Term Foreign-Currency Issuer Default Rating from top-rated “AAA” to “AA+” in a move that could lead to higher interest rates and borrowing costs. It follows the federal government narrowly avoiding a default on its debt earlier this summer and several weeks ahead of a possible shutdown if a politically-divided Congress fails to come to an agreement on spending 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 indicated the change was a long time coming, noting “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.”
The credit agency, which had placed the U.S. government’s “AAA” rating on a “negative” watch this past May, also cited other factors in announcing the change on Tuesday, including projections that show “tighter credit conditions, weakening business investment, and a slowdown in consumption will push the U.S. economy into a mild recession.”
Treasury Secretary Janet Yellen and the White House issued separate statements that each said they “strongly disagree” with the change. While Yellen called the decision “arbitrary and based on outdated data,” White House Press Secretary Karine Jean-Pierre waded into politics.
“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,” Jean-Pierre said. “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.”
It’s been more than a decade since the first and last time the U.S. faced such a downgrade. In 2011, S&P bumped the U.S. long-term rating from its “AAA” perch to “AA+” — where it stands today — citing “political brinkmanship” and the debt burden just days after then-President Barack Obama signed legislation to lift the debt ceiling just days before it was estimated the U.S. could have defaulted on its financial obligations.
After Fitch announced its downgrade on Tuesday, following years of rising U.S. government budget numbers and the debt doubling since 2011 to more than $32 trillion, Republicans argued the change was an indicator of too much spending and borrowing.
“Today’s decision by Fitch Ratings to downgrade U.S. sovereign debt to ‘AA+’ is yet another sign that incessant and irresponsible borrowing to fund bigger government is not without real repercussions,” Rep. David Schweikert (R-AZ) said in a post to X. “I’ve been outspoken in my belief that we need to get America’s fiscal house in order before it’s too late. Fitch’s downgrade should be seen as exactly what it is — a warning that continuing down the path of out-of-control borrowing will and does have serious consequences.”