The US government’s credit rating has been downgraded following concerns over the state of the country’s finances and its debt burden. From a report: Fitch, one of three major independent agencies that assess creditworthiness, cut the rating from the top level of AAA to a notch lower at AA+. Fitch said it had noted a “steady deterioration” in governance over the last 20 years. US Treasury Secretary Janet Yellen called the downgrade “arbitrary”. It was based on “outdated data” from the period 2018 to 2020, she said. Investors use credit ratings as a benchmark for judging how risky it is to lend money to a government. The US is usually considered a highly secure investment because of the size and relative stability of the economy.
However, this year saw another round of political brinkmanship over government borrowing. In June the government succeeded in lifting the debt ceiling to $31.4 trillion but only after a drawn-out political battle, which threatened to push the country into defaulting on its debts. When Congress returns from its summer recess, lawmakers will have to work to reach an agreement on next year’s budget before the end of September to prevent a government shutdown. “The rating downgrade of the United States 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 peers, said Fitch in a statement.
“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. Ms Yellen said she “strongly” disagreed with Fitch’s decision. “Treasury securities remain the world’s preeminent safe and liquid asset, and… the American economy is fundamentally strong,” she said in a statement.
