No, Bidenomics is not the reason the nation’s credit rating was downgraded
Republicans in Congress hurt the nation’s credit rating with their recent debt-limit brinkmanship, according to Fitch Ratings.
On Aug. 1, less than two months after Republicans in Congress barely averted a cataclysmic default on the national debt, credit rating agency Fitch Ratings downgraded the U.S. Treasury’s credit rating from “AAA” to “AA+,” citing a variety of factors. Rather than accept responsibility, Republicans are now trying to pin the blame for the downgrade on President Joe Biden and the Democratic Party.
Among the House Republicans who have accused Democrats of being responsible for the credit rating change is New York Rep. Mike Lawler, who posted a tweet that charged them with “downgrading our credit because of your trillion dollar spending sprees, producing record inflation, and increasing taxes.”
“#Fitch’s Treasury bond downgrade should be a wake-up call to the American people, Congress & the Biden Admin,” tweeted Arkansas Rep. French Hill. “#Bidenomics is driving up costs for families with regulatory mandates and record levels of out-of-control spending. This 40-year high inflation hurts all Americans.”
“President Joe Biden and Congressional Democrats have no one to blame for this week’s decision to downgrade America’s long-term credit rating but themselves and their reckless and out-of-control spending,” tweeted Florida Rep. Byron Donalds.
“The downgrade of our credit rating is proof positive that the negative economic trajectory caused by spend-thirsty legislators is leading our Nation and the American People to ruin. We MUST change the spending addiction in DC & plot a new course toward fiscal literacy and sanity,” Pennsylvania Rep. Scott Perry tweeted.
“The Fitch Ratings credit downgrade is a wake-up call that Bidenomics doesn’t work. Congress must assert its power of the purse to resolve this concern and restore faith in U.S. financial institutions,” tweeted Nebraska Rep. Don Bacon.
But an Aug. 1 statement issued by Fitch made it clear that the latest Republican-forced debt standoff and the national debt accumulated by both parties were the reasons for its decision to downgrade the Long-Term Foreign-Currency Issuer Default Rating for the United States: “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 relative to ‘AA’ and ‘AAA’ rated peers over the last two decades that has manifested in repeated debt limit standoffs and last-minute resolutions.”
The nation’s $32.7 trillion debt burden is the result of both spending legislation and tax cuts passed by Congress over the past several decades. A huge portion of that was legislation either backed by bipartisan majorities or enacted by Republicans without Democratic support.
Donald Trump signed a tax bill in 2017 that slashed tax rates for corporations and wealthy Americans and was estimated to add $1.9 trillion to the debt between 2018 and 2028. Even before the COVID-19 pandemic began, the annual budget deficit shot up 17% to $1 trillion on Trump’s watch.
Trillions of dollars more were borrowed in 2020 due to bills passed by lawmakers from both parties to address the coronavirus and its economic devastation. Reps. Bacon, Hill, and Perry all voted for the $2.2 trillion CARES Act; Donalds and Lawler were not yet in Congress at the time.
In total, Trump presided over $7.8 trillion in new borrowing during his single term in the White House.
During Biden’s presidency, about half of that amount has been added to the debt.
Treasury Secretary Janet Yellen wrote House Speaker Kevin McCarthy in January to inform him that unless lawmakers changed a law limiting federal borrowing to $31 trillion, the nation would be unable to pay its bills.
“Failure to meet the governments’ obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability,” Yellen warned. “Indeed in the past, even threats that the U.S. government might fail to meet its obligations have caused real harms, including the only credit rating downgrade in the history of our nation in 2011.”
That year, the Standard & Poor’s rating agency downgraded the nation’s credit rating after House Republicans held the debt limit hostage to demands for massive spending cuts. A July 2012 analysis by the nonpartisan Government Accountability Office estimated their debt limit gambit increased borrowing costs by $1.3 billion in 2011.
Biden urged a clean debt ceiling increase, and experts warned that failure to pass one could be catastrophic for the global economy. Instead, Bacon, Hill, Donalds, Lawler, and Perry were among the 217 House Republicans who voted for a bill pairing an increase with trillions of dollars in cuts to clean energy investments and safety net programs.
Though Congress ultimately passed a compromise bill in early June, it was not enough to avert Fitch’s credit rating downgrade.
Published with permission of The American Independent Foundation.
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