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“Fitch Ratings has downgraded the United States government’s credit rating, citing rising debt at the federal, state, and local levels and a ‘steady deterioration in standards of governance’ over the past two decades. The rating was cut Tuesday one notch to AA+ from AAA, the highest possible rating…
“It’s only the second time in the nation’s history that its credit rating has been cut. In 2011, the ratings agency Standard & Poor’s stripped the U.S. of its prize AAA rating after a prolonged fight over the government’s borrowing limit.” AP News
The right argues that the downgrade is warranted, and calls for reductions in spending.
“The deficit in the first nine months of this fiscal year hit $1.39 trillion, up 169% from the same period the year before. The deficit is supposed to shrink when the economy grows, but revenue isn’t keeping pace with runaway spending. The debt-ceiling deal this year did little to curtail the spending bulge still in the pipeline from the first two Biden years. Interest on the debt this year is expected to be $663 billion, which is $188 billion more than all corporate tax revenue…
“Treasury Secretary Janet Yellen criticized the decision as ‘arbitrary and based on outdated data.’ Outdated? Her own department on Monday increased the government’s expected borrowing from July to September to $1 trillion from $733 billion. That’s for three months…
“She also claims that ‘governance’ has improved under President Biden, citing the infrastructure bill and ‘other investments in America’s competitiveness.’ She must be joking. Since when is blowout spending a credit recommendation?”
Editorial Board, Wall Street Journal
“America’s political projects are financed by deficit spending, and they have been for decades… The Congressional Budget Office projects that Social Security will be unable to meet its obligations early in the next decade. Medicare’s Hospital Insurance Fund is projected to become insolvent by 2028…
“America’s debt obligations are rapidly becoming unsustainable. The fact that one of America’s major political parties responds to that prospect with some measure of urgency is not ‘reckless brinkmanship’ or ‘fiscal vandalism.’ It is an effort to contend with a set of undesirable circumstances that no amount of table pounding can dismiss… It’s America’s growing debt obligations that are the problem here.”
Noah Rothman, National Review
“The statement specifically notes that the U.S. government’s failure to provide a medium-term financial framework, which some call a budget, factored into the firm’s decision. For those of you keeping score, the last time Congress completed all of the steps in the budgeting process was in 1996. In the intervening years, gridlock and grandstanding have reduced the process to a series of omnibus packages, continuing resolutions, and debt ceiling increases…
“The government needs to enact real entitlement reform and end deficit spending for the foreseeable future. However, until there are more Rand Pauls and fewer Mitch McConnells in the Senate and several more Chip Roys in the House, along with a resident at 1600 Pennsylvania Avenue who can explain fiscal reality and act on it, expect the hits to keep coming.”
Stacey Lennox, PJ Media
The left is skeptical that the downgrade is warranted, but calls for plans to fix the long-term fiscal outlook.
The left is skeptical that the downgrade is warranted, but calls for plans to fix the long-term fiscal outlook.
“The US economy — especially relative to other developed economies — has been doing quite well. Inflation is at its lowest level since the spring of 2021, and economic growth, as measured by gross domestic product, was a robust 2.4% on an annualized basis in the second quarter. Meanwhile, the eurozone only recently crawled out of a recession that started in the last quarter of 2022. And, relative to other G7 nations, the US economy has maintained the strongest GDP growth by far…
“[But] it’s worth noting that while people may dismiss Fitch’s decision, they can’t dismiss the underlying reasons for it. The US debt situation is unsustainable because it will increasingly crowd out the country’s ability to pay for what Americans need and want in the years ahead.”
Bryan Mena and Jeanne Sahadi, CNN
“Two of the country’s three biggest bond rating agencies — Fitch and S&P Global Ratings — now give U.S. debt a slightly diminished rating. The best way for Mr. Biden and Republicans and Democrats in Congress to prove Fitch and S&P wrong is for lawmakers to begin to tackle the country’s long-term fiscal challenges, starting with Social Security…
“Even if there isn’t a calamity moment, rising debt and interest costs harm the economy as more national wealth goes to debt service and fewer dollars remain for public or private investment in research, infrastructure, education and other areas that can boost growth. Then there’s the reality that Social Security can make full payments to retirees for only another decade. Starting in 2034, payments will have to be reduced if changes aren’t made soon… Congress will have to act eventually, and the longer lawmakers wait, the more sacrifice Americans will have to make.”
Editorial Board, Washington Post
Some argue, “A high national debt is [not] a legitimate cause for creditworthiness concerns in a country that, as Alan Greenspan said earlier this year, can print money. In this situation, the US’s solvency, and its ability to pay its debts, isn’t really in question… What’s perhaps more in question is whether political dysfunction would lead the US to be unwilling to pay what it owes…
“But if that’s the agency’s argument, it seems to have muddied the waters a bit by also saying it has concerns about the US’s solvency. There seems to be some subtext that Fitch doesn’t believe US lawmakers can get their act together to fix looming issues like rising Medicare costs and the mass retirement of baby boomers, and that it doesn’t trust Congress to always avoid a default… It’s frustrating that Fitch didn’t say that in plain language.”
Keren Landman, Vox
A libertarian's take
“Fitch is the second of the ‘big three’ credit rating firms to downgrade the federal government from its highest to second-highest category. In 2011, Standard and Poor's (S&P) knocked America's debt rating from AAA to AA+, where it remains today. That change also followed a tense political standoff over the debt ceiling, though the federal government had a now-quaint $14 trillion in debt at the time. The current total is over $32.6 trillion… The [CBO] estimates that interest on the national debt will consume one-third of the federal budget by 2050…
“Doubling your debt in just over a decade is a good way to scare off those who might lend you more money in the future. Given current fiscal and political trends in Washington, it was a question of when, not if, the U.S. would see another credit rating downgrade. Unless something dramatically changes, this is unlikely to be the last.”
Eric Boehm, Reason
