Fitch Downgrades US Credit Rating; Biden Officials ‘Strongly Disagree’

One of the major credit rating agencies, part of the "Big Three," reduced the United States' rating slightly on Tuesday. This move was met with quick disapproval from Biden administration officials who strongly disagreed with the decision.

Fitch Ratings downgraded the country's Long-Term Foreign-Currency Issuer Default Rating from the highest "AAA" to "AA+" level. This change could result in increased interest rates and borrowing costs. The downgrade comes after the federal government narrowly avoided a debt default earlier in the summer and just ahead of a potential shutdown if Congress, divided along political lines, fails to agree on spending for the next fiscal year.

Fitch stated in a release that the United States' rating downgrade was due to the anticipated deterioration in fiscal conditions over the next three years, a high and growing government debt burden, and the weakening of governance compared to other "AA" and "AAA" rated countries. This erosion of governance was evident in repeated debt limit standoffs and last-minute resolutions.

Fitch had been closely monitoring the U.S. government's "AAA" rating since May and had placed it on a "negative" watch. They cited various reasons for the change announced on Tuesday, including projections indicating a mild recession for the U.S. economy due to tighter credit conditions, weakening business investment, and reduced consumption.

Both Treasury Secretary Janet Yellen and the White House expressed strong disagreement with the rating downgrade in separate statements. Yellen criticized the decision as arbitrary and based on outdated data, while White House Press Secretary Karine Jean-Pierre linked the downgrade to Republican officials' extremism and threats to the economy.

This is the first time in over a decade that the U.S. has faced such a downgrade. The last occurrence was in 2011 when S&P downgraded the long-term rating from "AAA" to "AA+" due to political brinkmanship and the debt burden.

After Fitch's announcement of the downgrade on Tuesday, Republicans argued that it indicated excessive spending and borrowing. Representative David Schweikert expressed the belief that the downgrade should serve as a warning about the consequences of unchecked borrowing and the urgent need to address the country's fiscal situation.