(SNews) – Democrat President Joe Biden’s “Bidenomics” just dealt a huge blow to the American people as a major credit ratings agency issued a downgrade for the United States.
Ratings agency Fitch downgraded the U.S. government’s top credit rating to AA+ from AAA.
The move comes in response to an expected fiscal deterioration over the next three years as well as a high and growing general government debt burden.
“In Fitch’s view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025,” the rating agency said.
The agency listed numerous factors for downgrading Biden and his economy which included the “Erosion of Governance.”
“In Fitch’s view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025,” the agency notes.
“The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management.
“In addition, the government lacks a medium-term fiscal framework, unlike most peers, and has a complex budgeting process.
“These factors, along with several economic shocks as well as tax cuts and new spending initiatives, have contributed to successive debt increases over the last decade.
“Additionally, there has been only limited progress in tackling medium-term challenges related to rising social security and Medicare costs due to an aging population.”
— New York Post (@nypost) August 1, 2023
The dollar ticked lower following the downgrade, which came two months after President Biden and the Republican-controlled House reached a debt ceiling agreement after months of political brinkmanship.
The deal lifted the government’s $31.4 trillion debt ceiling.
Biden’s Treasury Secretary Janet Yellen fired back and said she disagreed with Fitch’s downgrade.
In a statement, Yellen called Fitch’s assessment “arbitrary and based on outdated data.”
Investors use credit ratings to assess the risk profile of companies and governments when they raise financing in the debt capital markets.
“This was unexpected, kind of came from left field,” said Keith Lerner, Co-Chief Investment Officer, Truist Advisory Services, Atlanta.
“As far as the market impact, it’s uncertain right now.
“The market is at a point where it’s somewhat vulnerable to bad news…”
After the S&P downgrade, US stocks tumbled and the impact of the rating cut was felt across global stock markets, which were at the time already in the throes of a financial meltdown in the eurozone.
Paradoxically, US Treasuries prices rose because of a flight to quality from equities.
In May, Fitch had placed its “AAA” rating of US sovereign debt on watch for a possible downgrade, citing downside risks including political brinkmanship and a growing debt burden.