‘Extremism’ From Republicans to Blame For US Credit Rating Downgrade, Says White House

Fitch Ratings downgraded the U.S. debt rating on Tuesday from the highest rating of AAA to AA+, citing “expected fiscal deterioration over the next three years” and a “steady deterioration in standards of governance.”

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The decision drew criticism from the White House, with both President Biden’s Press Secretary Karine Jean-Pierre and Treasury Secretary Janet Yellen saying they strongly disagree with the decision.

“We strongly disagree with this decision,” Karine Jean-Pierre said in a statement Tuesday. “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.”

“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,” Jean-Pierre added.

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Secretary Yellen took a similar tact, saying that the decision to downgrade the U.S. credit rating was “arbitrary” and “based on outdated data.”

“Fitch’s quantitative ratings model declined markedly between 2018 and 2020 – and yet Fitch is announcing its change now, despite the progress that we see in many of the indicators that Fitch relies on for its decision,” Secretary Yellen said in a statement.

“Many of these measures, including those related to governance, have shown improvement over the course of this Administration, with the passage of bipartisan legislation to address the debt limit, invest in infrastructure, and make other investments in America’s competitiveness,” Yellen said.

“Over the past few years, the United States has undergone a historically fast economic recovery from a deep recession. Today, the unemployment rate is near historic lows, inflation has come down significantly since last summer, and last week’s GDP report shows that the U.S. economy continues to grow,” she said.

During his remarks on “Bidenomics” in Auburn, Maine last Friday, President Biden claimed that the United States has the most advanced economy in the world.

“Yesterday, we learned the economy grew faster than expected last quarter.  And this morning, we saw data showing that last month the annual rate of inflation continued to decline.  So inflation is now at its lowest point in two years,” the president said.

“Every major economy in the world, our inflation rate is lower. We’re growing faster. We’re economically more advanced than every other major country in the world,” he said.

Going by Fitch Ratings, however, the U.S. is now less creditworthy than Australia, Denmark, Germany, Luxembourg, the Netherlands, Switzerland, Norway, Sweden, and Singapore, all of which have maintained their AAA credit rating from the agency.

CNN reported Tuesday that in a meeting with Biden administration officials representatives from Fitch Ratings “repeatedly highlighted the January 6 insurrection as a significant concern as it relates to US governance.”

The statement from Fitch Ratings on the downgrade, however, primarily focuses on economic factors, not Jan. 6.

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The ratings agency, one of three such agencies nationally recognized by the U.S. Securities and Exchange Commission, attributes the downgrade to a high and growing general government debt burden, and an erosion of confidence in fiscal management due to “repeated debt-limit standoffs and last-minute resolutions.”

Fitch Ratings also mentions “limited progress” in tackling the rising costs of social security and Medicare due to an aging population.

The agency cited several projections to support their decision: a 6.3 percent rise in general government deficit as a share of GDP in 2023, too modest of tax cuts as part of the debt-limit compromise bill, the “Fiscal Responsibility Act,” and a debt-to-GDP ratio well above pre-pandemic levels and over two-and-a-half times higher than the AAA credit rating median.