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+.
“We strongly disagree with this decision,” White House press secretary Karine Jean-Pierre told reporters, claiming it “defies reality” because President Joe Biden has led the American economy to a “robust recovery.”
Treasury Secretary Janet Yellen also “strongly disagreed” with Fitch’s decision, arguing it was “arbitrary and based on outdated data” and that US Treasury securities remained the world’s “preeminent safe and liquid asset.”
Fitch is one of the big three US credit rating agencies, next to Moody’s and Standard & Poor’s. On Tuesday afternoon, it announced that Washington’s “long-term foreign-currency issuer default rating” would be downgraded, citing issues with governance, rising deficits, and a looming recession, among other things.
The decision “reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance” relative to other countries with the similar rating over the past 20 years, “that has manifested in repeated debt limit standoffs and last-minute resolutions,” 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’ median of 39.3%. Fitch also cited the Federal Reserve’s recent credit rate hikes, “weakening business investment, and a slowdown in consumption” to predict a “mild recession” in the fourth quarter of 2023 and the first quarter of 2024.