Current:Home > MyFitch downgrades US credit rating, citing mounting debt and political divisions -Wealth Impact Academy
Fitch downgrades US credit rating, citing mounting debt and political divisions
View
Date:2025-04-19 17:03:12
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 announced today is arbitrary and based on outdated data.”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! (8192)
Related
- Residents worried after ceiling cracks appear following reroofing works at Jalan Tenaga HDB blocks
- Alabama lawmakers begin session with votes on gambling and school vouchers ahead
- Minnesota woman accused of trying to get twin sister to take fall for fatal Amish buggy crash
- Zendaya Wears Her Most Jaw-Dropping Look Yet During Dune: Part Two Press Tour
- Backstage at New York's Jingle Ball with Jimmy Fallon, 'Queer Eye' and Meghan Trainor
- Injured woman rescued after Wyoming avalanche sweeps her 1,500 feet downhill
- Fans raise a red Solo cup to honor Toby Keith, who immortalized the humble cup in song
- The Year of the Dragon is about to begin — here's what to know about the Lunar New Year celebration
- Taylor Swift Eras Archive site launches on singer's 35th birthday. What is it?
- Tish Cyrus Details “Psychological Breakdown” Amid Divorce From Billy Ray Cyrus
Ranking
- Brianna LaPaglia Reveals The Meaning Behind Her "Chickenfry" Nickname
- High school football gave hope after deadly Maui wildfire. Team captains will be at the Super Bowl
- Senate deal on border security and Ukraine aid faces defeat as Republicans are ready to block bill
- How the art world excludes you and what you can do about it
- Trump's 'stop
- Bill Maher opens up about scrapped Kanye West interview: 'I wouldn't air that episode'
- Mud and debris are flowing down hillsides across California. What causes the slides?
- Biden plans to hold a March fundraiser with former Presidents Obama and Clinton in New York
Recommendation
New data highlights 'achievement gap' for students in the US
Travis Kelce was one of NFL's dudeliest dudes. Taylor Swift shot him into the stratosphere.
Correction: Election 2024-Decision Notes-Nevada story
Cheese recall: Dozens of dairy products sold nationwide for risk of listeria contamination
What to watch: O Jolie night
East Palestine, Ohio, residents still suffering health issues a year after derailment: We are all going to be statistics
How Prince Harry and King Charles' Relationship Can Heal Amid Cancer Treatment
Correction: Election 2024-Decision Notes-Nevada story