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Bidenomics: US credit rating downgraded by Fitch over growing debt, 'deterioration' in governance

Fitch also projected that the U.S. economy will enter a "mild recession."

Published: August 2, 2023 10:14am

Updated: August 2, 2023 11:05am

The United States government's credit rating was downgraded by Fitch Ratings over its ever-increasing debt and a "deterioration" in governance standards that have eroded financial confidence.

Fitch, one of the so-called "Big Three" credit rating agencies, on Tuesday downgraded the rating one notch from "AAA," the highest possible level, to "AA+." Fitch also assigned a "Stable Outlook" to the U.S., which means that the agency expects the rating to remain stable for the next year to year and a half.

"The rating downgrade of the United States reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance ... that has manifested in repeated debt limit standoffs and last-minute resolutions," Fitch wrote explaining its reasoning for the downgrade.

The agency also said that it believes "there has been a steady deterioration in standards of governance over the last 20 years" and "repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management."

Most recently, the U.S. was nearly pushed to default on its debt in June until Congress passed a last-minute debt ceiling compromise. The U.S. debt currently sits at over $32.6 trillion, according to the Treasury.

Additionally, the government has experienced three shutdowns over the past decade, with another considered "likely" to occur this year, according to the Brookings Institution think tank. 

Meanwhile, Fitch projects that the U.S. economy will enter a "mild recession" in the fourth quarter of 2023 and the first quarter of 2024.

The downgrade, which is the second in the nation's history according to The Associated Press, puts the U.S.'s credit rating by Fitch below that of the European Union and 11 countries including Canada, Singapore and Australia.

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