Biden administration official blames Trump, Jan. 6 for Fitch AAA US downgrade
Biden official says Fitch repeatedly referenced Jan. 6 riots in explaining US credit downgrade
President Biden's administration is placing the blame for the U.S.' drop in credit rating on former President Donald Trump and the Jan. 6 riots.
Fitch announced Tuesday it has officially downgraded the U.S.' long-term foreign-currency issuer default rating to "AA+" from "AAA," saying the downgrade "reflects the expected fiscal deterioration" and the nation's heavy debt burden.
An administration official claimed to FOX Business on Wednesday that the underlying model was AAA until Trump's administration.
FITCH DOWNGRADES US' LONG-TERM RATINGS FROM AAA TO AA+
President Biden speaks about his economic agenda at Flex LTD in West Columbia, South Carolina, on July 6, 2023. (Evan Vucci / AP Newsroom)
The administration official claimed the model dipped in the Trump-era and despite efforts since 2020, Fitch's change in consideration on a number of factors meant the model could not recover.
The official told FOX Business that Fitch repeatedly cited Jan. 6 as a factor in its decision, considering instability of governance as an aspect of the downgrade in rating.
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Fitch Ratings headquarters in New York (Brendan McDermid / Reuters Photos)
In its announcement on Tuesday, the ratings agency pointed to America's "erosion of governance," rising deficits and tightening by the Federal Reserve. It also said it expects the U.S. economy to slip into a mild recession in the fourth quarter.
U.S. Treasury Secretary Janet Yellen issued a statement pushing back on Fitch's move, saying the rating agency was using old data and arguing conditions have improved under the Biden administration.
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"I strongly disagree with Fitch Ratings’ decision," Yellen's statement said. "The change by Fitch Ratings announced today is arbitrary and based on outdated data."
Treasury Secretary Janet Yellen speaks during a press conference at the U.S. Embassy in Beijing on July 9, 2023. (AP Photo/Mark Schiefelbein / AP Newsroom)
"Fitch’s quantitative ratings model declined markedly between 2018 and 2020 — and yet Fitch is announcing its change now, despite the progress that we see in many of the indicators that Fitch relies on for its decision," she continued. "Many of these measures, including those related to governance, have shown improvement over the course of this administration, with the passage of bipartisan legislation to address the debt limit, invest in infrastructure, and make other investments in America’s competitiveness."
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Investors use credit ratings to assess the risk profile of companies and governments when they raise financing in the debt capital markets. Generally, the lower a borrower's rating, the higher its financing costs.
FOX Business' Breck Dumas contributed to this report.