Janet Yellen during a speech in McLean, Virginia on August 2, 2023 (AFP/Stefani Reynolds)
The Biden administration cried foul on Wednesday after Fitch’s decision to strip the United States of its precious AAA, with the rating agency citing the consequences of decades of deterioration in governance between Republicans and Democrats.
“I strongly disagree with Fitch’s decision, and I think it is completely unjustified,” said Joe Biden’s Minister of Economy and Finance, during a visit to a tax center in Virginia. , on the East coast.
Fitch on Tuesday downgraded the United States’ debt rating by one notch to AA+ — as S&P did in 2011, without ever raising it again. Thus, of the three main rating agencies, only Moodys still places the United States in the category of the best issuers, worthy of being rated triple A.
The rating agency had warned, at the end of May, in the midst of a standoff 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, then deploring the “political polarization”.
– “Bizarre, arbitrary, absurd” –
But the Biden administration was surprised at Fitch’s timing of carrying out his threats.
White House spokeswoman Karine Jean-Pierre said she was going “against reality, (…) at a time when President Biden has helped achieve the strongest recovery in 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 judged it on Wednesday “astonishing given the strength of the American economy”. According to her, this choice is based on an assessment “based on obsolete 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 strongest financial system in the world,” 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 matter to us is that governments on both sides, Republican and Democratic, have been unable to come up with lasting solutions to address growing fiscal issues,” the Fitch official said. Ratings for the American continent, Richard Francis, questioned Wednesday on the CNBC channel.
“We have observed a fairly constant deterioration in governance over the past decades,” he insisted, particularly highlighted by “the constantly tightrope resolution of the issue of the debt ceiling”.
– “Not important” –
The more so as the budgetary situation of the United States should not arrange, according to Fitch, which envisages 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 services have made it possible to carry out 175 procedures concerning millionaires, with a total recovery of 38 million dollars.
JPMorgan bank boss Jamie Dimon said on CNBC on Wednesday that the disappearance of the American AAA “didn’t really matter” because “it’s the markets that decide”.
“There are a bunch of countries that are rated better than us, triple A, but they live off the American military system. Rating them triple A and not America is kind of ridiculous,” he said.
On the other hand, he says he “agrees with the fact that we should get rid of the debt ceiling”.
© 2023 AFP
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