Janet Yellen Slams Fitch Ratings’ Downgrade of US Credit Rating as “Entirely Unwarranted”
US Treasury Secretary Janet Yellen has expressed strong objections to Fitch Ratings’ recent downgrade of the United States credit rating. Yellen called the decision “entirely unwarranted” and criticized the agency for ignoring the improvements in governance metrics under President Joe Biden’s administration.
Speaking at an Internal Revenue Service contractor office near Washington on Wednesday, Yellen emphasized that Fitch’s downgrade failed to consider the resilience of the US economy. She highlighted indicators such as low unemployment, falling inflation, continued economic growth, and strong innovation as evidence of the country’s economic strength.
Yellen stated, “Fitch’s decision is puzzling in light of the economic strength we see in the United States. I strongly disagree with Fitch’s decision, and I believe it is entirely unwarranted.” According to Yellen, the agency’s assessment was based on outdated data and failed to reflect the improvements in US governance indicators over the past two and a half years of the Biden administration.
Despite the downgrade, Yellen emphasized that US Treasury securities remain the world’s most secure and liquid asset, and she asserted that the American economy remains fundamentally strong.
Fitch had justified its decision by citing a deterioration in US governance, which it claimed began during the administration of former President Donald Trump. US Treasury officials revealed that Fitch considered factors such as the January 6, 2021 insurrection at the US Capitol building and the increasing polarization of major political parties as indicators of deteriorating governance.
In addition to governance concerns, Fitch also cited a projected fiscal deterioration over the next three years and repeated debt ceiling negotiations as reasons for the downgrade. Yellen, however, emphasized that fiscal responsibility is a priority for both her and President Biden. She pointed out that the June debt limit deal reached with Republicans included over $1 trillion in deficit reduction over 10 years. Furthermore, Biden’s proposed 2024 budget, which includes tax hikes on wealthy individuals and corporations, is expected to reduce deficits by $2.6 trillion over the next decade.
Yellen also highlighted the investments planned to modernize the Internal Revenue Service (IRS) and improve tax enforcement. These investments, funded by the $60 billion provided by last year’s Inflation Reduction Act, are projected to reduce deficits by “hundreds of billions of dollars” over the next decade.
Despite Yellen’s objections, Fitch Ratings stands by its decision to downgrade the US credit rating by one notch, from AAA to AA+. The agency remains concerned about the fiscal outlook and the potential risks to the US government’s ability to meet its financial obligations.
As the financial world watches closely, the impact of Fitch’s downgrade on the US economy and global financial markets remains uncertain.