“The downgrade (of the note) of the United States reflects the fiscal deterioration expected in the next three years” and the “erosion of governance” after “repeated impasses on the debt limit and last minute resolutions” (to avoid a default).
Fitch also took aim at “a high and growing public debt burden” in the United States.
“The government lacks a medium-term fiscal framework, unlike most of its peers, and has a complex budget process. These factors, as well as various economic shocks, tax cuts, and new spending initiatives, contributed to successive increases of the debt over the last decade,” added the rating agency.
To this is added the high inflation, despite the fact that the government says that it decreases every month, the banking crisis, the current mortgage crisis that Washington denies and the conditions of a recession from the end of 2021, which the current administration also denies. An immigration crisis and the war in Ukraine that have added to the strain on the pockets of American taxpayers and the deterioration of consumption with large retail and service chains closing stores and restaurants with significant numbers for three years.
Very limited progress on debt
“Furthermore, only limited progress was made in the face of the medium-term challenge of rising pension and health insurance costs due to the aging of the population,” the report added.
Treasury Secretary Janet Yellen disagreed with Fitch’s decision, calling it “arbitrary” in a statement. But this attitude of Yellen and the left in power is already common in the current administration. Everything that goes against them is totally questionable and “arbitrary”.
In 2011, an episode similar to the one that this year put the United States close to default, led the S&P agency to an equal reduction of the US debt note, considered the safest in the world.
Yellen emphasized that US Treasury bonds “remain the safest and most liquid asset in the world, and that the fundamentals of the US economy are strong”, but the reality indicates the opposite of what the federal entity, once independent and of great respect, now fully aligned with the designs of the White House with the left and the extreme left in the US. The same is true of the Federal Reserve, which affirms that inflation has fallen below 5% with prices similar to those of 2022 where it reached 9%.
“There has been a steady deterioration in governance standards over the last 20 years, including on budget and debt matters, despite the bipartisan agreement in June to suspend the debt ceiling until January 2025,” Fitch concluded.
To this is added the banking crisis, the current mortgage crisis that the government denies and the conditions of a recession from the end of 2021, which the current administration in Washington also denies.
The Joe Biden government and the Republican opposition found an agreement in extremis at the beginning of June to avoid the moratorium, after a bitter political battle of months.
Fitch warned in late May that it could downgrade the US rating, due to the risk of default.
The agency kept the outlook for the world’s largest economy’s credit rating stable, which means it does not foresee further downgrades.
FOUNTAIN: With information from AFP and AP
