The rating agency Fitch on Tuesday (August 1) withdrew its precious AAA rating in the United States and lowered it by one notch to AA, a first since 2011, citing in particular an “erosion of governance” linked the repeated crises over the debt ceiling. The agency justified its decision primarily on the consequences of “repeated stalemates on the debt ceiling and last-minute resolutions”.
“There has been a steady deterioration in governance standards over the past two decades, including on fiscal and debt matters, despite the June agreement, backed by both parties, to suspend the debt ceiling until ‘in January 2025,” Fitch lamented. “We strongly disagree with this decision,” White House spokeswoman Karine Jean-Pierre said in a statement. “It flies in the face of reality to downgrade the United States at a time when President Biden has achieved the strongest recovery of any major economy in the world,” she added.
The administration of Democrat Joe Biden and the Republican opposition had reached in extremis at the beginning of June, after several months of an intense political battle, an agreement to raise the debt ceiling and avoid a payment default by the United States. .
But according to Fitch, despite this agreement, “repeated political clashes over the debt ceiling and last-minute resolutions have eroded confidence in fiscal management.” Fitch warned at the end of May that it could downgrade the United States’ rating because of the risk of default.
Another reason the agency ended up downgrading America’s prized “triple A” was the “expected fiscal deterioration over the next three years,” as well as “a high and growing public debt burden.”
The outlook changes from negative to stable
“The government does not have a medium-term budget framework, unlike most of its peers, and has a complex budget process. These factors, along with several economic shocks, tax cuts and new spending initiatives, have contributed to successive increases in debt over the past decade,” Fitch noted.
“Furthermore, only limited progress has been made to address the medium-term challenges related to rising pension and health insurance costs due to the aging population,” he further underlined. rating agency.
The outlook changes from negative to stable, which means that Fitch does not anticipate any further deterioration in the short term.
US Treasury Secretary Janet Yellen immediately responded in a statement, “I strongly disagree with Fitch’s decision,” she said. She thus deplored a degradation “based on dated data”.
It is the first time since 2011 that one of the three major rating agencies has downgraded the rating of the world’s largest economy. It was then S
