‘Bizarre’: Biden Team Blames Trump for US Credit Rating Downgrade
Biden Administration Disputes Fitch’s Downgrade of U.S. Credit Rating
Biden administration officials expressed their dissatisfaction on Tuesday with ratings agency Fitch’s decision to downgrade the top U.S. government credit rating. They argued that Fitch’s methodology was flawed as it focused on issues from the previous Trump administration.
Leading the charge was Treasury Secretary Janet Yellen, who promptly issued a statement declaring her strong disagreement with Fitch Ratings’ decision. Fitch had announced the downgrade of U.S. long-term debt from AAA to AA+.
Fitch’s report cited “a steady deterioration in standards of governance over the last 20 years” and expressed concerns about the erosion of confidence in fiscal management due to repeated debt-limit political standoffs and last-minute resolutions.
This downgrade comes after a recent partisan battle over the federal debt ceiling, which was eventually raised. It is reminiscent of a similar downgrade in 2011 by rival ratings agency Standard and Poor’s, which occurred during a debt ceiling fight that also threatened a U.S. default.
The Biden administration emphasized that the governance issues highlighted by Fitch occurred during the Trump administration, while noting that Fitch had maintained the AAA rating during those years.
“This is a bizarre and baseless decision for Fitch to make now,” said a senior Biden administration official, highlighting the improvements in U.S. governance during the Biden presidency. They added, “It defies common sense to attribute this downgrade to the mess caused by the previous administration and reckless actions by congressional Republicans.”
The official also expressed skepticism about a significant increase in federal borrowing costs resulting from the downgrade, citing the limited market reaction thus far and the decline in rates after the 2011 downgrade.
Economists and analysts responded with confusion to the move, questioning its timing and predicting minimal impact on Treasury debt markets.
Biden’s reelection campaign spokesman Kevin Munoz and White House press secretary Karine Jean-Pierre placed blame on Trump and congressional Republicans for the downgrade. Munoz stated, “This Trump downgrade is a direct result of an extreme MAGA Republican agenda defined by chaos, callousness, and recklessness that Americans continue to reject,” referring to Trump’s encouragement of Republicans in Congress to “do the default” over the debt ceiling.
Yellen criticized the decision, arguing that it disregards the resilience of the U.S. economy and assumes a recession this year. She pointed out that the unemployment rate is near historic lows, inflation has decreased significantly since last summer, and recent GDP reports indicate continued economic growth.
(Reporting by David LawderEditing by Chris Reese, Heather Timmons and Sam Holmes)
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