Current:Home > ScamsFitch downgrades US credit rating, citing mounting debt and political divisions -Wealth Momentum Network
Fitch downgrades US credit rating, citing mounting debt and political divisions
View
Date:2025-04-24 18:28:19
WASHINGTON (AP) — Fitch Ratings has downgraded the United States government’s credit rating, citing 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 Tuesday one notch to AA+ from AAA, the highest possible rating. The new rating is still well into investment grade.
The decision illustrates one way that growing political polarization and repeated Washington standoffs over spending and taxes could end up costing U.S. taxpayers. In 2011, the ratings agency Standard & Poors stripped the U.S. of its prize AAA rating and also pointed to partisan divisions that made it difficult for the world’s biggest economy to control spending or raise taxes enough to reduce its debt.
Reduced credit ratings over time could raise borrowing costs for the U.S. government. The Government Accountability Office, in a 2012 report, estimated that the 2011 budget standoff raised Treasury’s borrowing costs by $1.3 billion that year.
At the same time, the size of the U.S. economy and historic stability of the U.S. government has kept its borrowing costs low, even after the Standard & Poor’s downgrade.
Fitch cited the worsening political divisions around spending and tax policy as a key reason for its decision. It said U.S. governance has declined relative to other highly rated countries and it noted “repeated debt limit standoffs and last-minute resolutions.”
Another factor in Fitch’s decision is that it expects the U.S. economy to tumble into a “mild recession” in the final three months of this year and early next year. Economists at the Federal Reserve made a similar forecast this spring but then reversed it in July and said growth would slow but a recession would likely be avoided.
“I strongly disagree with Fitch Ratings’ decision,” said Treasury Secretary Janet Yellen in a statement. “The change ... announced today is arbitrary and based on outdated data.”
Yellen noted that the U.S. economy has rapidly recovered from the pandemic recession, with the unemployment rate near a half-century low and the economy expanding at a solid 2.4% annual rate in the April-June quarter.
A deal to resolve a standoff over the government’s borrowing limit in June included “over $1 trillion in deficit reduction and improved our fiscal trajectory,” Yellen added.
veryGood! (3886)
Related
- Louvre will undergo expansion and restoration project, Macron says
- Farm Bureau Warily Concedes on Climate, But Members Praise Trump’s Deregulation
- Members of the public explain why they waited for hours to see Trump arraigned: This is historic
- Megan Fox Says She's Never, Ever Loved Her Body
- Appeals court scraps Nasdaq boardroom diversity rules in latest DEI setback
- In U.S. Race to Reap Offshore Wind, Ambitions for Maryland Remain High
- Ariana Madix Reveals the Shocking First Time She Learned Tom Sandoval and Raquel Leviss Had Sex
- 2017: Pipeline Resistance Gathers Steam From Dakota Access, Keystone Success
- South Korea's acting president moves to reassure allies, calm markets after Yoon impeachment
- State Clean Air Agencies Lose $112 Million in EPA Budget-Cutting
Ranking
- Biden administration makes final diplomatic push for stability across a turbulent Mideast
- It’s ‘Going to End with Me’: The Fate of Gulf Fisheries in a Warming World
- Love Coffee? It’s Another Reason to Care About Climate Change
- Developer Pulls Plug on Wisconsin Wind Farm Over Policy Uncertainty
- Residents worried after ceiling cracks appear following reroofing works at Jalan Tenaga HDB blocks
- Jimmie Allen's Estranged Wife Alexis Shares Sex of Baby No. 3
- After Back-to-Back Hurricanes, North Carolina Reconsiders Climate Change
- Scant obesity training in medical school leaves docs ill-prepared to help patients
Recommendation
Senate begins final push to expand Social Security benefits for millions of people
Decade of Climate Evidence Strengthens Case for EPA’s Endangerment Finding
As car thefts spike, many thieves slip through U.S. border unchecked
Climate Activist Escapes Conviction in Action That Shut Down 5 Pipelines
Where will Elmo go? HBO moves away from 'Sesame Street'
U.S. Electric Car Revolution to Go Forward, With or Without Congress
Woman, 28, arrested for posing as 17-year-old student at Louisiana high school
Priscilla Presley and Riley Keough Settle Dispute Over Lisa Marie Presley's Estate