A general view of the White House in Washington, U.S. June 12, 2023. REUTERS/Jonathan Ernst/File Photo
WASHINGTON, Aug 1 (Reuters) – Biden administration officials on Tuesday complained about Fitch’s downgrade of the US government’s top credit rating, saying the group had used flawed methods and ignored a robust economy.
The charge was led by US Treasury Secretary Janet Yellen, who issued a statement minutes after Fitch announced that she would downgrade US long-term debt ratings from AAA to AA+, saying: “I concur with Fitch Ratings’ decision absolutely disagree”.
Fitch’s report states that “over the past 20 years there has been a steady deterioration in governance standards” and that “repeated political deadlocks on debt ceilings and last-minute solutions have undermined trust in financial management” .
The move comes two months after a bitter partisan battle over the federal debt ceiling, which was eventually raised. It reflects a US downgrade by rival rating agency Standard and Poor’s in 2011, just days after a similar debt-ceiling battle also threatened to default the US.
Biden administration officials told reporters that governance issues cited by Fitch arose during the tenure of then-President Donald Trump, Joe Biden’s predecessor. Nevertheless, the agency has left the rating at AAA in these years, it said.
“This is a bizarre and unfounded decision that Fitch must make now,” said a senior Biden administration official, adding that Fitch’s actions during the Biden presidency have improved the US administration.
“It just defies common sense to see this downgrade as a result of what was really messed up by the last administration and the Republican recklessness in Congress,” the official said.
The official added that given the limited market reaction so far and a fall in interest rates following the 2011 downgrade, it would be surprising to see a significant increase in federal borrowing costs as a result of the downgrade.
The move sparked confused reactions from economists and analysts, who questioned the timing and said it would likely have minimal impact on government bond markets.
Biden’s re-election campaign spokesman Kevin Munoz and White House press secretary Karine Jean-Pierre blamed Trump and congressional Republicans for the downgrade.
“This demotion of Trump is a direct result of an extreme MAGA agenda by Republicans of chaos, callousness and recklessness that Americans continue to oppose,” Munoz said, noting that Trump encouraged Republicans in Congress to do so to comply with “the default” on the debt ceiling year.
Yellen said the decision, which assumes a US recession this year, ignores the resilience of the economy.
“Today, the unemployment rate is near an all-time low, inflation has fallen significantly since last summer and last week’s GDP report shows the US economy is continuing to grow,” Yellen said.
Reporting by David Lawder, editing by Chris Reese, Heather Timmons and Sam Holmes
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