(McLean) The Biden administration cried foul on Wednesday after Fitch’s decision to strip the United States of its prized AAA, with the rating agency citing the consequence of decades of deteriorating ratings. governance between Republicans and Democrats.
“I strongly disagree with Fitch’s decision, and I think it’s completely unwarranted,” Joe Biden’s Secretary of Economy and Finance said while visiting a Virginia tax office , on the East coast.
Fitch downgraded the US debt rating by one notch to AA on Tuesday – as S had done.
The rating agency had alerted, at the end of May, in the midst of a showdown between Republicans and Democrats on the raising of the debt ceiling, and while the risk of a default was looming, that it risked reviewing the triple AAA down.
And had maintained its surveillance after an agreement between Congress and the White House, deploring the “political polarization”.
But the Biden administration was surprised at Fitch’s timing of carrying out his threats.
White House spokeswoman Karine Jean-Pierre said she was “flying against reality, […] at a time when President Biden has delivered the strongest recovery of all.” the major economies of the world”.
White House Council of Economic Advisers Chairman Jared Bernstein called it “bizarre, arbitrary, absurd, and confusing,” adding that “the timing doesn’t make sense.”
Janet Yellen also called it “astonishing given the strength of the American economy” on Wednesday. This choice is based, according to her, on an assessment “based on outdated data”.
But, she said, “Fitch’s decision does not change what we all already know: that Treasury securities remain the world’s most secure and liquid asset, and that the United States economy is fundamentally strong”.
“Long term, the United States remains the world’s largest, most dynamic and innovative economy – with the world’s strongest financial system,” Yellen said.
The economic situation of the country is however far from being the only element taken into account by Fitch.
“Among the things that are important to us is that governments on both sides, Republican and Democratic, have not been able to come up with lasting solutions to address growing fiscal issues,” the Fitch executive said. Ratings for the American continent, Richard Francis, questioned Wednesday on the CNBC channel.
“We have seen a fairly consistent deterioration in governance over the past few decades,” he insisted, highlighted in particular by “the constant tightrope resolution of the debt ceiling issue.”
Especially since the budget situation in the United States is not expected to improve, according to Fitch, which forecasts high and persistent deficits in the next two years.
During her visit to the tax office, Janet Yellen nevertheless underlined the efforts aimed at improving collection, in particular from high-income taxpayers and large companies.
She said that “in recent months”, the tax authorities have carried out 175 procedures involving millionaires, with a total recovery of $38 million.
JPMorgan bank boss Jamie Dimon told CNBC on Wednesday that the demise of the US AAA “didn’t really matter” because “the markets decide.”
“There are a bunch of countries rated higher than us, triple A, but they live on the American military system. Rating them triple A and not America is kind of ridiculous,” he lamented.
On the other hand, he says he “agrees that we should get rid of the debt ceiling”.