White House officials slammed Fitch Ratings' downgrade of the US government's top credit rating on August 1, with a senior Biden administration official calling it a “bizarre and baseless” decision that is based on outdated data and a reduced governance score that occurred during the Trump era.
The official said the ratings agency did not consider factors that had previously kept the US rating at the top AAA level, according to a Reuters report.
US Treasury Secretary Janet Yellen “strongly disagreed” with the Fitch move, saying it ignores the US economy's resilience. "Today, the unemployment rate is near historic lows, inflation has come down significantly since last summer, and last weeks GDP report shows that the US economy continues to grow," Yellen said.
Biden's re-election campaign spokesman Kevin Munoz blamed Trump and congressional Republicans for the downgrade. "This Trump downgrade is a direct result of an extreme MAGA Republican agenda defined by chaos, callousness, and recklessness that Americans continue to reject," Munoz was quoted as saying by Reuters. He added that Trump encouraged Republicans in Congress to "do the default" over the debt ceiling this year.
White House Press Secretary Karine Jean-Pierre said, “It defies reality to downgrade the United States at a moment when President Biden has delivered the strongest recovery of any major economy in the world.”
Fitch's downgrade of US' long-term foreign currency ratings from AAA to to AA+ comes after a debt ceiling agreement in June that came after months of political brinkmanship and ultimately lifted the government's $31.4 trillion debt ceiling.
"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 in a statement.
In 2011, another ratings agency, Standard and Poor's stripped US of its triple-A rating following a similar debt ceiling fight that threatened a US default and the rating remains AA+. Following this, US stocks tumbled and the impact of the rating cut was felt across global stock markets.
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.