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U.S. Credit Rating Falls to AA+

U.S. Credit Rating Falls to AA+

By RZR News Team
Aug 06, 2023

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Analysis

Americans should be deeply troubled by the recent downgrade of the U.S. credit rating to AA+. It is evident that this alarming development emanates from the poor fiscal and economic health of our nation, driven by the misguided policies of the Biden administration and the Democratic regime plaguing our nation’s government.

Since taking office, President Biden and his Democratic cronies have championed a reckless spending agenda, pushing for massive government interventions in far-away lands (Ukraine, Iran and likely more nations as the war machine gets turned back on after being shut down by President Trump) and meaningless social programs without sufficient consideration of their long-term impact. The surge in federal spending and the push for tax hikes have raised concern about the mounting national debt and the inflationary pressures on our economy.

Fiscal responsibility should be a common-sense value and the deteriorating credit rating serves as a stern warning that our nation’s financial stability is at risk. It is essential to prioritize a balanced budget and responsible spending to safeguard the U.S.’s economic future for generations to come.

Furthermore, Biden’s decisions on energy policy and regulatory measures have weakened energy independence and hampered economic growth. These actions have led to higher energy costs for American families and businesses, putting additional strain on our already fragile economy..

The Biden administration and the Democrats must be held accountable for their misguided policies, which have maligned our financial solvency. It is time for a return to fiscal responsibility, pro-growth policies and the preservation of conservative principles that have historically ensured the strength and prosperity of our great nation.

Learn more about the conservative viewpoint

itch has downgraded the U.S. government’s top credit rating from AAA to AA+, citing a fiscal deterioration over the next three years. Two months after President Joe Biden and the Republican-controlled House of Representatives reached a debt ceiling agreement lifting the $31.4 trillion borrowing limit, the rating agency Fitch keeps the U.S. credit rating on negative watch.  Fitch had first flagged the possibility of a downgrade in May and maintained the position in June after the debt ceiling crisis was solved; it intends to give a final review in the third quarter of this year.

To get a better understanding of the importance of this rating, we can relate it to individuals having a credit score to measure their ability to make on-time payments. A national rating of  AAA is the highest rating that an agency can give a country, locality or company concerning its ability to repay its debts. The top three credit rating agencies are Standard & Poor’s, known as S&P Global, Fitch and Moody’s, and they all use the same system of letters, ranging from a top AAA through B, C and D for payment defaults. The ratings as it pertains to countries are reflective of their economic growth, tax revenue, government spending, deficits and debt levels. 

Countries with high credit ratings have increased chances of getting foreign institutional investment for their companies and industries in order to yield long-term gains and it leaves the impression that the country will maintain good standing of its financial promises. Also, a good rating is important for countries wanting to access funding for development projects in the international bond market. The U.S. has held a strong reputation for its Treasury bonds being the safest and most reliable investments where institutions can grow their assets. The U.S. has always held a AAA rating with all three agencies and the fact that this could change due to a decline in ratings is why Fitch’s decision is a big deal.

The decline of the AAA rating to AA+ means the U.S. no longer has the highest credit quality. This drop in ratings is giving the impression that the U.S. has a spending problem. The White House and the U.S. Treasury Secretary Janet Yellen have disagreed with the rating, claiming the decision was based on the premises of outdated data and ignoring a resilient economy. Fitch argues that political standoffs and last-minute resolutions over the debt limit have eroded confidence in fiscal management.

Even if what is being said may be true, is the rating fair? Despite what may be a resilient economy, if the country is not paying what is owed then that will negatively impact the score. This scenario is no different than if a person is making a decent income but is not making on-time payments on essentials such as rent or car payments; it will negatively impact their credit score and a low one can prevent individuals from making certain purchases such as securing a home and loans. Stephanie Kelton, a Professor of Economics and Public Policy, says that Fitch seems to be rating based on how it perceives the country’s willingness and not the ability to pay. According to Fitch, both the left- and right-wing parties failed to implement meaningful and long-term solutions to entitlement programs such as social security and Medicare, poorly navigated economic shocks, improperly handled tax cuts and now spent more, all of which have contributed to debt increases over the past decade. On the other hand, high national debt and political dysfunction may not be a solid basis to track a country’s creditworthiness. 

Sovereign credit ratings take into account per capita income, GDP growth, rate of inflation, external debt, economic development and history of defaults. Given Fitch’s reasoning, it is understandable why it is being accused of not giving a proper assessment before rating. Stating not having long-term solutions for entitlement programs alludes to the idea that Fitch does not think lawmakers are capable of fixing issues like rising Medicare costs or social security for the older generation and that Congress cannot avoid a default. A default would cause an immediate sharp recession, sending shockwaves through the global and financial markets.

Unless political dysfunction would be the driving cause for a country not being able to pay its debts, this rating does not seem quite fair. If Fitch wanted to express concern over the political climate in the matter, then perhaps that would be acceptable because maybe the country would have been given a chance to prove there is not a need to hold it against the overall rating, which could leave a lasting impact on the federal government having to pay higher interest rates, ultimately shifting the cost over to the taxpayers. Unfortunately, public outrage will not fix it. As long as the U.S. continues to keep up with its financial promise, there will likely not be any prominent fiscal consequences.

– Briauna B.

Learn more about the independent viewpoint

The dropping of the credit rating of the United States further contextualizes the steady economic decline of the country. A country with $32 trillion in debt can affect its credit rating just like a person’s debt can affect their credit score. 

Fitch, the credit rating agency that downgraded the United States, has expressed its dubiousness concerning the U.S. politicians trying to fix this setback. Given that this country’s politicians constantly fight each other and barely came to a consensus to prevent a national default, it is understandable why Fitch might think that way. 

Common sense should let these politicians know that the best way to alleviate the situation is to work together and put more money into programs that benefit people rather than in their own pockets while simultaneously paying off these debts that they have. While that sounds like it is easier said than done, it can be argued that they have the means to do it. Sometimes that means they would have to deviate from their agenda and sacrifice their personal endeavors for the greater good of the country.

Because of the fact that the Dems and the GOP’s agendas heavily contradict each other, they can lose sight of the economic problems that affect them both and even their constituents on a greater scale. This is all to say that the United States does not necessarily have to be in the economic position that it is currently in. Both parties need to do what is right to try to steadily improve the economic as well as the political state of the country.

Learn more about the liberal viewpoint

Government should not incur debt, which burdens future generations without their consent. We support the passage of a “Balanced Budget Amendment” to the U.S. Constitution, provided that the budget is balanced exclusively by cutting expenditures, and not by raising taxes.”

“We support a halt to inflationary monetary policies and unconstitutional legal tender laws.”

Libertarian Party Platform Planks 2.5 and 2.7

A downgrade in the USA’s credit rating comes as no surprise to any Libertarian. Spending by the Republicrats is out of control, running up an astronomical $32 trillion in debt! That amounts to nearly 100 grand per citizen, a national disgrace! Despite this crushing debt, Republicrats continue to spend money as if governing the country was a game of Monopoly, carving out a $1.5 trillion dollar budget deficit. Congress is so addicted to spending money that our nation’s debt-to-GDP ratio is over 119 percent! Last year the government spent $476 billion just on interest payments related to this debt. 

Such extreme debt can cause problems for the economy. Even now the national debt is negatively affecting the economy. As the debt continues to grow, interest payments will, too, take a bigger bite out of the budget each year, leaving less for spending on vital projects such as infrastructure improvements. 

This massive spending is also devaluing the dollar. Continually printing money causes inflation and during the Covid pandemic, the Treasury was printing money with reckless abandon. This created the highest inflation rate in decades. The US Dollar has lost 92 percent of its purchasing power since 1933, with the covid spending spree accelerating that decline. 

It is only logical that tremendous debt and a declining dollar would result in a credit rating downgrade. It becomes more difficult to trust and invest in a country whose government is so fiscally irresponsible. If we want to reverse this trend, then we need to kick the Republicrats out of Congress and replace them with officials who are committed to sustainable spending policies and balancing the budget. It’s time to vote in Libertarian Party candidates. 

– Pietro S. Geraci

Learn more about the libertarian viewpoint