Yellen called Fitch’s downgrade “completely unjustified” given the strength of the US economy.

U.S. Treasury Secretary Janet Yellen speaks during a roundtable discussion on climate finance at the U.S. embassy in Beijing, Saturday July 8, 2023. Mark Schiefelbein/Pool via REUTERS/File Photo

MCLEAN, Va., Aug 2 (Reuters) – US Treasury Secretary Janet Yellen on Wednesday voiced further objections to Fitch Ratings’ downgrade of the US’s main credit rating, calling it “completely unwarranted” for reflecting improvements in governance metrics during the Biden -Government ignored the country’s economic strength.

Speaking at an Internal Revenue Service contractor’s office near Washington, Yellen said Tuesday’s rating agency announcement failed to take into account a resilient US economy with low unemployment, falling inflation, sustained growth and strong innovation.

“Fitch’s decision is puzzling given the economic strength we’re seeing in the United States,” Yellen said. “I strongly disagree with Fitch’s decision and believe it is completely unjustified.”

She said Fitch’s “erroneous assessment” was based on outdated data and did not reflect improvements in US governance indicators over the past two and a half years of President Joe Biden’s administration.

“Ultimately, Fitch’s decision doesn’t change what we all already know: that government bonds remain the world’s most important safe and liquid asset and that the American economy is fundamentally strong.”

According to US Treasury officials, Fitch had cited a deterioration in the US administration that had begun during the previous Trump administration in making his decision.

Richard Francis, a senior director at Fitch, told Reuters that the deterioration was partly reflected in the January 6, 2021 riot in the US Capitol as former President Donald Trump sought to overturn the 2020 election results.

But Francis said the deterioration is also reflected in this year’s debt ceiling battle and the growing polarization of both major political parties, making it harder to reach a compromise.

In his decision to downgrade the U.S. credit rating by one notch from AAA to AA+, Fitch also cited worsening fiscal positions over the next three years that would increase deficits, as well as repeated, no-nonsense negotiations on the debt ceiling, which would increase solvency endangering the US government It’s Bills.

But Yellen said fiscal responsibility is a priority for her and Biden, and the debt limit deal reached with Republicans in June called for a deficit reduction of more than $1 trillion over 10 years.

Biden’s 2024 budget proposal, which includes significant tax hikes for wealthy individuals and businesses, would also reduce deficits by $2.6 trillion over the next decade.

Yellen said investments to modernize the IRS and improve tax enforcement, funded by $60 billion in new resources provided by last year’s Inflation Reduction Act, would reduce deficits by “hundreds of billions of dollars over a decade.” dollars”.

She visited the 22nd Century Technologies office in McLean, Virginia to highlight a commitment that will allow taxpayers to file all documents and correspondence digitally during the 2024 tax season, eliminating the need to manually process up to 125 million documents per year would. The company has an order to develop scanning technology to convert paper documents so that they can be processed digitally.

Reporting by David Lawder; Edited by Paul Simao

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