As the sun set on Monday, August 1st, 2023, financial news took an unexpected and unpleasant turn. FitchRatings, one of the globe’s primary credit rating agencies, downgraded the United States’ credit “default rating” from ‘AAA’ to ‘AA+’. The reasoning? The agency pointed to expected fiscal deterioration, an ever-bulging debt burden, and a steady erosion of governance that has witnessed endless debt limit standoffs and hairbreadth resolutions.
The reaction was swift and condemnatory. Treasury Secretary Janet Yellen dismissed the downgrade as “arbitrary and based on outdated data,” aligning with a host of high-profile economic pundits and politicians who shared her disbelief.
Harvard University Economics Professor Jason Furman slammed Fitch’s move as “completely absurd,” questioning the agency’s relevance more than the economic health of the United States. Similarly, ex-Treasury Secretary and esteemed economist Larry Summers, dubbed the move “bizarre and inept,” despite acknowledging the long-run fiscal challenges that the U.S. faces.
But where the real anger was directed wasn’t at FitchRatings but at the folks on Capitol Hill, particularly House Speaker Kevin McCarthy (R-California) and his loyal band of Republicans. Senate Majority Leader Chuck Schumer (D-New York) and Representative Brendan Boyle (D-Pennsylvania) lay the blame “squarely on the shoulders” of McCarthy.
According to Schumer, the downgrade underscored the negative consequences of the Republicans’ “reckless brinksmanship and flirtation with default.” Boyle, a top Democrat on the House Budget Committee, pointed the finger squarely at “Speaker McCarthy and the extreme MAGA Republicans who openly rooted for default” during the recent debt ceiling standoff.
The message from Boyle was clear: the repeated brinksmanship and deficit-funded tax giveaways for the wealthy and big corporations, hallmarks of the Republican playbook, have come home to roost. The result? For the second time in American history, Republican extremism has cut the legs from under the American economy.
Why did McCarthy and his comrades ignore these clear warnings? Why did they push forward with a debt ceiling crisis they were told would likely force a downgrade? And why, in the face of inevitable consequences, did they choose partisan politics over fiscal responsibility?
That’s the question on everyone’s mind. However, the answer is anything but a mystery. The GOP’s irresponsible handling of the debt ceiling crisis, coupled with the turmoil triggered by the January 6th, 2021, insurrection, set the stage for this damaging downgrade. Now, it’s up to us to hold them accountable and demand better stewardship of our economy.
