Both the White House and the US Treasury Department raised objections on Tuesday to the decision by credit rating company Fitch to downrank the long-term US rating from AAA to AA+.
\u201cWe strongly disagree with this decision,\u201d White House press secretary Karine Jean-Pierre told reporters, claiming it \u201cdefies reality\u201d because President Joe Biden has led the American economy to a \u201crobust recovery.\u201d
Treasury Secretary Janet Yellen also \u201cstrongly disagreed\u201d with Fitch\u2019s decision, arguing it was \u201carbitrary and based on outdated data\u201d and that US Treasury securities remained the world\u2019s \u201cpreeminent safe and liquid asset.\u201d
Fitch is one of the big three US credit rating agencies, next to Moody\u2019s and Standard & Poor\u2019s. On Tuesday afternoon, it announced that Washington\u2019s \u201clong-term foreign-currency issuer default rating\u201d would be downgraded, citing issues with governance, rising deficits, and a looming recession, among other things.
The decision \u201creflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance\u201d relative to other countries with the similar rating over the past 20 years, \u201cthat has manifested in repeated debt limit standoffs and last-minute resolutions,\u201d Fitch said.
The company predicted a growing government deficit, noting that the US debt-to-GDP ratio was currently at 100.1%, two and a half times higher than the AAA-rated countries\u2019 median of 39.3%. Fitch also cited the Federal Reserve\u2019s recent credit rate hikes, \u201cweakening business investment, and a slowdown in consumption\u201d to predict a \u201cmild recession\u201d in the fourth quarter of 2023 and the first quarter of 2024.<\/p>\n\n\n\n