Fitch Ratings
Fitch Ratings has downgraded the US credit rating, citing an expected increase in government debt over the next three years and a “steady deterioration in standards of governance” over the past two decades. Image Credit: AP

Washington: Fitch downgraded the United States' credit rating by a step on Tuesday from the top-tier AAA to AA+, citing factors like an "erosion of governance" that has manifested in debt limit standoffs.

"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 peers, said Fitch in a statement.

In 2011, a debt ceiling impasse also led ratings agency S&P to lower its US credit rating from AAA to AA+, drawing bipartisan outrage.

Yellen disagrees

On Tuesday, Treasury Secretary Janet Yellen said she "strongly" disagreed with Fitch's decision, calling it "arbitrary and based on outdated data."

She said that Fitch's quantitative ratings model declined between 2018 and 2020 but the agency was only announcing its change now despite progress seen in indicators.

Yellen stressed that "Treasury securities remain the world's preeminent safe and liquid asset, and that the American economy is fundamentally strong."

The Fitch statement said the rating has a stable outlook.

While the lifting of the debt ceiling - a limit on government borrowing to pay for bills already incurred - was often routine, it has become a contentious issue for several years.