Fitch Bond Rating Agency Downgraded U.S. Public Debt From The Highest Rating. Citing Political Deterioration Over The Next Three Years
Fitch bond rating agency downgraded the US public debt.
The U.S. public debt was downgraded from a rating of AAA to AA+ during the first week of August by the Fitch bond rating agency in the country.
Due to the nation’s rising debt and deteriorating political stability, Fitch bond rating agency has downgraded U.S. credit from the top rating.
Fitch bond rating agency cited that the anticipated fiscal decline over the next three years, an elevated and progressively increasing burden of government debt, and the deterioration of governance relative to AA and AAA related peers over the past twenty years that has culminated in reiterated debt limit disputes and last-second resolutions.
The Fitch bond rating agency essentially highlighted excessive political wrangling, insufficient money creation, and excessive spending.
During the 2011 debt limit crisis, Standard & Poors downgraded U.S. debt from AAA to AA+, therefore this has already happened once.
The budget deficit for the first 10 months of fiscal year 2023 was estimated to be $1.6 trillion at the time of Fitch bond rating agency’s decision. The deficit this year has increased by $894 billion or 123% compared to the first 10 months of last year when it was $726 billion.
According to Fitch bond rating agency, standards of governance have steadily declined over the past 20 years, notably in regards to fiscal and debt concerns the ratings firm stated on Tuesday.
The United States was downgraded from its prior AAA rating to AA+, with the Fitch bond rating agency citing the country’s complex budgetary procedure and lack of medium-term planning for its finances.
The debt is now 113% of the country’s economic output significantly higher than it was before the pandemic, due to these causes as well as the fiscal shocks caused by the pandemic, additional spending, and tax reductions.
The new rating by the Fitch bond rating agency was criticized by Janet Yellen, the secretary of the Treasury, who described it as arbitrary and built on obsolete facts.
According to the Associated Press, the United States may have to pay higher interest rates on Treasury bonds, bills, and notes as a result of lower credit ratings.
The last time the U.S. faced a debt downgrade was in 2011, when Standard & Poor’s lowered the country’s rating by one notch after protracted congressional gridlock nearly brought about a default.
Despite the downgrade, Fitch bond rating agency listed the country’s advantages, including “its broad, sophisticated, well-balanced and wealthy economy, which is backed by a growing business environment,” and the U.S. dollar’s stand as the reserve currency of the world.