这么热的天气,不喝点刨冰不行啊。 | 8k8 legit | Updated: 2024-08-17 17:28:43
A downgrade of the US government's credit rating sent stocks reeling on Wednesday and elicited finger-pointing over the root cause.
Fitch Ratings cited rising debt at the federal, state and local levels and a "steady deterioration in standards of governance" over the past two decades. The rating was cut late Tuesday by one notch to AA+ from AAA. The highest possible rating is AAA, and the new rating is still well into investment grade.
"The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management," the Fitch report said. It also said US governance has declined relative to other highly rated countries.
The news pushed major stock indexes lower Wednesday. The Dow Jones Industrial Average fell 348 points, or 0.98 percent, to 35,283; the S&P 500 lost 63 points, or 1.38 percent, to 4,513; and the Nasdaq Composite dropped 310 points, or 2.17 percent, to 13,973.
Biden administration officials criticized Fitch's move.
"I strongly disagree with Fitch Ratings' decision," Treasury Secretary Janet Yellen said in a statement. "The change by Fitch Ratings announced today is arbitrary and based on outdated data."
Yellen said that the US economy has recovered well from the pandemic recession, with the unemployment rate near a 50-year low, and the economy expanding at a 2.4 percent annual rate in the April-June quarter.
The ADP National Employment report showed private payrolls increased more than expected in July, pointing to continued labor market resilience that could shield the economy from a recession.
"Democrats are attacking Fitch, and Treasury Secretary Janet Yellen criticized the decision as 'arbitrary and based on outdated data,'" The Wall Street Journal Editorial Board wrote on Wednesday. "Her own department on Monday increased the government's expected borrowing from July to September to $1 trillion from $733 billion. That's for three months.
"She also claims that 'governance' has improved under President Biden, citing the infrastructure bill and 'other investments in America's competitiveness.' She must be joking. Since when is blowout spending a credit recommendation?" the editorial said.
It was only the second time that the US credit rating has been cut. In 2011, ratings agency Standard & Poor's stripped the US of its AAA rating after a long fight over the government's borrowing limit.
The Government Accountability Office, in a 2012 report, estimated that the 2011 budget standoff raised the Treasury's borrowing costs by $1.3 billion that year.
At the time of the previous downgrade, the ratio of US debt held by the public to GDP at the time was 65.5 percent, while the nonpartisan Congressional Budget Office (CBO) expects it to be 98.2 percent this year, the Journal noted. It is expected to rise to 115 percent of GDP by 2033.
"The debt-ceiling deal this year did little to curtail the spending bulge still in the pipeline from the first two Biden years," the Journal editorial said. "Interest on the debt this year is expected to be $663 billion, which is $188 billion more than all corporate tax revenue."
Steven Ricchiuto, US chief economist at Mizuho Securities, said, "It's an unsustainable budget situation because the economy can't even grow its way out of this problem going forward," the New York Post reported.
Douglas Holtz-Eakin, former CBO director from 2003 to 2005, told Yahoo Finance on Wednesday: "On the substance, the US has a very big problem. The fact that we continue to not deal with it I think is at the heart of the downgrade."
Fitch also informed Biden administration officials that the Jan 6, 2021, uprising at the US Capitol was a factor in its decision to downgrade because it indicated an unstable government, according to a person familiar with the discussions between the administration and the rating agency.
US Senate Majority Leader Chuck Schumer, a New York Democrat, said in a statement: "The downgrade by Fitch shows that House Republicans' reckless brinksmanship and flirtation with default has negative consequences for the country. Republicans need to learn from their mistakes and never push our country to the brink of default again."
House Ways and Means Committee Chair Jason Smith, a Missouri Republican, said, "When Fitch specifically cited the problem of 'last minute' resolutions they may as well have noted Biden's refusal to negotiate with Republicans for months (on the debt ceiling), while insisting on even more wasteful spending."
Agencies contributed to this story.