'Reckless brinksmanship': McCarthy blamed for 'bizarre and inept' US credit downgrade
On the evening of Monday, August 1st, 2023, FitchRatings lowered the United States' credit "default rating" from 'AAA' to 'AA+', which the agency stated, "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."
Citing news reports about the state of the American economy, Treasury Secretary Janet Yellen blasted the update as "arbitrary and based on outdated data."
Yellen, MSNBC opinion columnist Steve Benen noted on Tuesday, "had plenty of company."
Harvard University Economics Professor Jason Furman, for instance, called Fitch's move "completely absurd. And is more likely to show that Fitch is irrelevant to the views of investors in U.S. sovereign debt than it is to show investors anything about the United States."
Similarly, ex-Treasury Secretary and Harvard Professor Emeritus Larry Summers posted on X that although "the United States faces serious long-run fiscal challenges... the decision of a credit rating agency today, as the economy looks stronger than expected, to downgrade the United States is bizarre and inept."
Economist Robert Reich weighed in as well, asserting that "US credit-rating agency Fitch doesn't know what it's doing. Less risk of default on US Treasury securities now than before debt ceiling was raised."
Lawmakers such as Senate Majority Leader Chuck Schumer (D-New York) and Representative Brendan Boyle (D-Pennsylvania) also rebuked Fitch's decision and placed the blame "squarely on the shoulders" of House Speaker Kevin McCarthy (R-California).
"The downgrade by Fitch shows that House Republicans' reckless brinksmanship and flirtation with default has negative consequences for the country," Schumer said in a statement. "Republicans need to learn from their mistakes and never push our country to the brink of default again."
Boyle, the ranking Democrat on the House Budget Committee, directly implicated "Speaker McCarthy and the extreme MAGA Republicans who openly rooted for default" during the latest debt ceiling standoff this past spring.
"For years, Republicans were warned that their repeated brinksmanship and deficit-funded tax giveaways for the wealthy and big corporations would have consequences" Boyle added. "And now, for the second time in American history, Republican extremism and recklessness has undercut the American economy."
Benen believes that those criticisms are accurate, writing that McCarthy "ignored the warnings and proceeded with the scheme anyway."
Benen also listed three reasons why:
Republicans were told they’d likely force a downgrade if they proceeded with their debt ceiling crisis.
Republicans proceeded with their debt ceiling crisis.
It led to a downgrade.
Benen concluded, "I can appreciate why GOP leaders want to avoid responsibility for this, but Democrats aren't the ones who keep creating debt ceilings, and it wasn't President Joe Biden who launched the Jan. 6 crisis. The mystery surrounding who's to blame for the downgrade isn't a mystery at all."
Meanwhile:
Yale economist praises Bidenomics for financial growth 'across the board'
When the Wall Street Journal's conservative editorial board used the term "Bidenomics" in 2021, it wasn't meant to be favorable but rather, was used to disparage President Joe Biden's economic policies. But in 2023, Biden and his allies consider the term a badge of honor.
Emphasizing that the U.S. economy has enjoyed a robust recovery following the COVID-19 pandemic — including the lowest unemployment rates in over half a century — Biden's reelection campaign is touting "Bidenomics" as a reason to reelect him in 2024.
During a late July appearance on MSNBC, Jeffrey Sonnenfeld — an economics professor at Yale University in Connecticut — credited Biden's "interventionist" economic policies for robust GDP in the United States.
Liberal MSNBC host Lawrence O'Donnell told Sonnenfeld that as a rule, he doesn't like to give presidents "very much credit" for either "good things" or "bad things" that "happen in the economy." But he added that the Biden Administration has been "so active in the economy" — in a positive way.
Sonnenfeld agreed, telling O'Donnell, "Absolutely. And across the board, we're seeing the results. There's that confidence….. consumer confidence up 70 percent. But so is it with Wall Street. We have the NASDAC up 50 percent this year. It's pretty remarkable. The S&P up 20 percent. Everything is going in the right direction."
Sonnenfeld described the Biden Administration as "successfully economically interventionist," even comparing Biden's economic program to President Franklin Delano Roosevelt's New Deal of the 1930s and early 1940s.
The Yale economist told O'Donnell, "The cynicism out there is just something that's being echoed in a circular echo chamber of sorts. But the financial facts are something quite different from what the pollsters put out there. The pollsters got everything wrong…. The facts are uniformly positive."
