Fitch Reaffirms U.S. AAA Rating
Today, one of the other big three credit rating agencies, Fitch Ratings, reaffirmed their AAA rating of the United States and held our outlook at "stable". This is, of course, a break from the recent S&P downgrade of the United States from AAA to AA+ with a negative outlook. For Fitch, AAA is their highest rating.
In a statement, Fitch said:
"The affirmation of the US 'AAA' sovereign rating reflects the fact that the key pillars of US's exceptional credit worthiness remains intact: its pivotal role in the global financial system and the flexible, diversified and wealthy economy that provides its revenue base. Monetary and exchange rate flexibility further enhances the capacity of the economy to absorb and adjust to 'shocks.'"
With this announcement, each of the three major rating agencies now have a different assessment of the United States. Moody's has also affirmed our AAA rating (which they call Aaa), but has put the U.S. on a negative outlook and warned that a downgrade might be on the horizon. Standard & Poor's (S&P), on the other hand, downgraded the U.S. to AA+ and put the country on a negative outlook for further downgrades.
In explaining its downgrade of the U.S., we explained last week that S&P did not dispute Fitch's assessment of the nation's economic capacity to repay its debt. Rather, their downgrade was primarily due to concerns over America's political capacity to put its debt on a stable path. As they said:
“[T]he downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned… we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government’s debt dynamics anytime soon."
As CRFB policy director Marc Goldwein explained, "The country's most critical structural problem isn't employment or entitlements. It's Washington."
Even despite the recent affirmation of our AAA rating from Fitch, policymakers must remain vigilant in tackling our debt problems. As CRFB President Maya MacGuineas argued in our recent press release:
“Between now and December policymakers will either be involved in a serious national discussion over how to bring our debt under control or else another round of theater and brinksmanship... We still have a real opportunity to enact serious entitlement changes, tax reform, and an economic growth strategy. But if we fail, I fear other rating agencies will follow suit with S&P, with economically dangerous consequences.”