Fitch Ratings Downgrades U.S. Debt Rating, Biden Officials Disagree

New Title: Fitch Ratings Lowers U.S. Debt Rating, Biden Administration Objects

Fitch Ratings, a renowned credit rating agency, has decreased the United States’ long-term foreign-currency issuer default rating from AAA to AA+. This decision was based on the projected deterioration of the country’s finances over the next three years, the increasing burden of government debt, and a decline in governance standards compared to higher-rated peers over the last two decades. Fitch also identified the repeated debt limit conflicts and last-minute resolutions as factors that have eroded confidence in fiscal management.

Projections indicate that the U.S. government’s deficit will reach 6.3% of GDP in 2023 due to weaker federal revenues, new spending initiatives, and a higher interest burden. Initially, Fitch had put the U.S. credit rating on negative watch due to the debt ceiling dispute in Washington. However, it has since removed the negative watch and assigned a “stable outlook” to the U.S. rating.

In response to the downgrade, officials from the Biden administration have criticized Fitch’s decision, emphasizing that the governance issues highlighted occurred during the previous administration led by President Donald Trump. They argue that the current administration has made progress in various indicators that Fitch considers for its rating. Treasury Secretary Janet Yellen has called the change arbitrary and based on outdated data, highlighting the improvements made under the current administration.

The White House strongly disagrees with the decision as well, asserting that Fitch’s ratings model deteriorated during the Trump presidency and improved under President Biden. They view the downgrade as a consequence of actions and political conflicts from the previous administration.

Despite the downgrade, the Biden administration maintains optimism about the U.S. economy’s recovery under President Biden’s leadership. They point to bipartisan legislation addressing the debt limit and investments in infrastructure and competitiveness as evidence of progress.