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United States
Opinion
Anthony Rowley
Anthony Rowley

Macroscope | US ignores Fitch credit rating downgrade at its own peril

  • Washington policymakers and Wall Street traders are choosing to shrug off the growing concern over management of federal government debt
  • Doing so when many other countries are anxious to lessen their dependence on the US government securities market and the dollar is courting trouble

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The US Capitol building is seen at night in Washington on August 6. Congress’ perpetual inability to get its financial house in order and repeated dalliances with defaulting on US sovereign debt may well bring a painful reckoning before too long. Photo: TNS
Anthony Rowley
Pride comes before a fall, it is said, and the mixture of arrogance and complacency which the United States is displaying at present with regard to the state of its public finances suggests that it could trip up badly before long. It almost seems to be courting disaster wilfully.
To shrug off a government debt downgrade just when many other countries are anxious to lessen their dependence on the massive US government securities market and on the US dollar seems perverse in the extreme. Even so, that is what Washington and New York seem to think they can do with impunity.
Putting it more bluntly, when those who resent your attitude go to work not only on undermining your foundations but also on building their own fortresses, it is not wise to ignore such threats or simply disparage others’ efforts. You need to be on the lookout.
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This month, Fitch Ratings announced its decision to downgrade the US long-term credit rating to AA+ from AAA. It cited expected fiscal deterioration during the next three years and repeated down-to-the-wire debt ceiling negotiations that threaten the government’s ability to pay its bills.

Instead of acknowledging a growing problem of market discomfort or credibility with the management of federal government debt, US Treasury Secretary Janet Yellen disagreed with Fitch’s downgrade, calling it “arbitrary and based on outdated data”.

A man passes the offices of Fitch Ratings, one of the three major credit rating agencies, in New York on August 2. Fitch downgraded the US government credit rating from AAA to AA+, a change it partially attributed to politics around the recent debt ceiling stand-off. Photo: EPA-EFE
A man passes the offices of Fitch Ratings, one of the three major credit rating agencies, in New York on August 2. Fitch downgraded the US government credit rating from AAA to AA+, a change it partially attributed to politics around the recent debt ceiling stand-off. Photo: EPA-EFE
The White House also said it strongly disagreed with the decision. “It defies reality to downgrade the United States at a moment when President [Joe] Biden has delivered the strongest recovery of any major economy in the world,” press secretary Karine Jean-Pierre said, according to Reuters.
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