© Henry Ray Abrams/AP/FileSignage for Fitch Ratings • October 9, 2011 • New York
The rating was downgraded one notch to AA+ from AAA on Tuesday, the highest possible rating. The new rating is still well within investment grade.
The decision illustrates one way that growing political polarization and Washington's repeated deadlocks on spending and taxes could end up costing American taxpayers dearly. In 2011, the rating agency Standard & Poor's stripped the United States of its AAA rating and also pointed to partisan divisions that made it difficult for the world's largest economy to control spending or raise taxes enough to reduce its debt.
Reduced credit ratings over time could increase borrowing costs for the US government. The Government Accountability Office, in a 2012 report, estimated that the 2011 budget impasse increased Treasury borrowing costs by $1.3 billion that year.
At the same time, the size of the U.S. economy and the historic stability of the U.S. government kept its borrowing costs low even after the standard was adopted. - Standard & Poor's downgrade.
Fitch cited deepening political divisions around spending and tax policy as a key reason for his decision. He said US governance had declined relative to other highly rated countries and he noted "repeated standoffs on debt limits and last-minute resolutions."
Another factor in Fitch's decision is that it expects the US economy to fall into a "mild recession" in the last three months of this year and early next year. Federal Reserve economists made a similar forecast this spring, but then reversed it in July and said growth would slow but a recession would likely be averted.
Treasury Secretary Janet Yellen, in a statement, said: "I strongly disagree with Fitch Ratings' decision. The change...announced today is arbitrary and based on outdated data."
Yellen noted that the US economy has recovered quickly from the pandemic recession, with the unemployment rate near a half-century low and the economy expanding at a solid 2.4 annual rate % during the April to June quarter.
Comment: Why? Considering many 'covid deaths and health impairments' were from within the US workforce, the unemployment rate - upon a 'return to normal' - would obviously go down. Americans, restricted in purchasing for 2+ years, would obviously increase spending.
A deal to resolve a standoff over the government's borrowing limit in June included "more than $1 trillion in deficit reduction and improved our fiscal trajectory," Yellen added.
For years it's only been Moody's and Standard & Poors. Is Fixed the unspoken of bastard child dragged out of the basement from time to time.
Doesn't matter, they are late for the party and no one noticed.