Fitch downgrades US credit rating, citing 'repeated debt-limit political standoffs'
Fitch Ratings, one of the three major independent credit rating agencies, downgraded the long-term U.S.credit rating from AAA, the highest tier, to AA+ on Tuesday evening. This is only the second credit downgrade in U.S. history, following a cut by S&P Global Ratings in 2011 amid a fight between House Republicans and President Barack Obama over raising the federal borrowing limit. Fitch said a similar standoff this spring, in which House Republicans again refused to raise the debt ceiling for months, heavily influenced its decision.
The U.S. has experienced "a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters," Fitch said in a statement. "The repeated debt limit political standoffs and last-minute resolutions have eroded confidence in fiscal management." The rating agency also cited America's growing debt burden at the state and federal levels.
Generally, a lower credit rating mean higher borrowing costs, since investors are less likely to lend money at favorable interest rates. Most analysts said it's unlikely the U.S. will face a short-term hit from Fitch's downgrade, however, given the sheer size of the U.S. economy, strength of the U.S. dollar, and steady demand for U.S. Treasury notes and bonds. Still, falling a notch at one rating agency places Washington on notice that its political brinksmanship is doing real harm to the U.S. economy.
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Treasury Secretary Janet Yellen called Fitch's downgrade "arbitrary and based on outdated data" from 2018 to 2000. "Fitch's decision does not change what Americans, investors and people all around the world already know: that Treasury securities remain the world's pre-eminent safe and liquid asset, and that the American economy is fundamentally strong," she said.
White House officials also said Fitch had repeatedly pointed to the Jan. 6, 2021, insurrection as a sign of degraded governance and a factor in its downgrade decision. One official told The Associated Press that Fitch assessed last year that U.S. government stability declined from 2018 to 2021, under former President Donald Trump, but increased since President Biden took office.
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Peter has worked as a news and culture writer and editor at The Week since the site's launch in 2008. He covers politics, world affairs, religion and cultural currents. His journalism career began as a copy editor at a financial newswire and has included editorial positions at The New York Times Magazine, Facts on File, and Oregon State University.
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