- Fitch Ratings downgraded the U.S. credit rating from ‘AAA’ to ‘AA+’ on Tuesday, citing a perceived lack of credibility in the authorities with which the United States pays its debts.
- Experts told the Daily Caller News Foundation that the Biden administration’s spending through the Control Inflation Act, CHIPS, science legislation and infrastructure projects increased the deficit and led to the downgrade.
- “This is a direct result of the Biden administration spending, borrowing, and printing too much money,” E.J. Antoni, a research fellow at the Heritage Foundation Grover M. Harman Federal Budget Center, told DCNF. .
Experts have blamed President Joe Biden’s administration for Tuesday’s downgrade of the U.S. credit rating, experts told the Daily Caller News Foundation.
Fitch Ratings downgraded its default rating on long-term US foreign currency issuers from ‘AAA’ to ‘AA+’. This means the government may soon need additional payments to finance the debt. Experts told the DCNF that the Biden administration is to blame for the decline in U.S. credit credibility due to policies that have led to high spending and huge deficits. (Related: Biden wins economic growth, but experts see red flags)
“This is a direct result of the Biden administration spending, borrowing, and printing too much money,” E.J. Antoni, a research fellow at the Heritage Foundation Grover M. Harman Federal Budget Center, told DCNF. . “Debt servicing costs have exploded as U.S. Treasury yields have risen. Adding deficits, snowballing debt, higher funding costs, higher interest rates, etc. It’s a death spiral.”
Fitch Ratings cited rising fiscal deficits and a high GDP-to-debt ratio totaling 112.9% this year as part of the reasons for the downgrade. according to Go to press release. The agency also referred to repeated debt stalemate over the past two decades, citing an incident in June when lawmakers nearly missed a deadline to extend the debt ceiling.
“This is the second time since August 2011 that the credit rating of the U.S. government, the issuer of U.S. Treasuries, has been downgraded,” said Peter Earle, an economist at the National Bureau of Economic Research. DCNF. “This means there are growing doubts about the ability of the US government to meet its financial obligations.”
U.S. Treasury Secretary Yellen said Fitch’s downgrade of the U.S. credit rating was “obsolete.” Very accurate. The current median debt-to-GDP ratio for AAA-rated sovereign bond issuers is currently 39.3%. The last time the US debt-to-GDP ratio was at that level was between 1978 and 1979.
— Pete Earle (@peter_c_earle) August 2, 2023
“It is unrealistic for President Biden to downgrade the U.S. at a time when he has delivered one of the strongest recoveries of any of the world’s major economies,” White House Press Secretary Carine Jean-Pierre said on Tuesday.
“The Biden administration is embarking on several major spending initiatives (Inflation Control Act, CHIPS and Science Act, Infrastructure Spending) that result in huge deficits,” Earle told DCNF. “In the first nine months of the current fiscal year, the federal deficit reached $1.39 trillion, 170% of the same period last year.”
Earle stressed that the immediate impact on Americans from the credit downgrade would be minimal, but said the increased debt burden could be passed on to the average American.
“If the debt burden gets significantly higher, governments may move to more painful ways of meeting their obligations, such as increasing taxes or expanding the money supply (inflation),” he told the DCNF. rice field.
According to a press release, Fitch Ratings forecast that the recession will begin later this year in the fourth quarter of 2023 and last through the first quarter of 2024. The agency also expected the Federal Reserve to raise interest rates to 5.5% to 5.75% by September.
“Governments that issue their own currency can inflate their debt by devaluing the currency used to service their debt,” Antoni told the DCNF. “Under Biden, that is exactly what happened. The dollar lost 16% of its value. This is a implied default and is essentially no different than the government refusing to pay 16% of the outstanding amount.”
The White House did not immediately respond to the DCNF’s request for comment.
All content produced by the Daily Caller News Foundation, an independent, non-partisan news distribution service, is available free of charge to legitimate news publishers capable of serving large audiences. All reissues must include our company logo, press byline, and DCNF affiliation. If you have any questions about our guidelines or partnering with us, please contact us at email@example.com.