US Credit Rating Downgraded Over ‘Erosion of Governance’

A major credit agency downgraded its rating of U.S.-issued debt from AAA to AA+, citing an “erosion of governance” over the last 20 years.

Why the Change? Fitch Ratings, one of the “Big Three” credit rating agencies, explained its decision on Tuesday, saying, “repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management.” Fitch also cited the lack of “a medium-term fiscal framework,” as well as “successive debt increases” spurred by “tax cuts and new spending initiatives.” Treasury Secretary Janet Yellen downplayed the rating change, saying it was “arbitrary and based on outdated data”; recent economic data has led many economists to take a more optimistic outlook.

Key Quote: A senior director at Fitch told Reuters (Center bias), “You have the debt ceiling, you have Jan. 6. Clearly, if you look at polarization with both parties ... the Democrats have gone further left and Republicans further right, so the middle is kind of falling apart basically,” adding, “We don't fault one party or the other for the fiscal situation.”

How the Media Covered It: News coverage often cherry-picked parts of Fitch’s explanation to match partisan narratives. On Fox News (Right bias), O'Leary Ventures Chairman Kevin O'Leary attributed the downgrade to purported future deficit increases from the bipartisan CHIPS Act and the Democrat-led Inflation Reduction Act — which would place the blame on liberal Democrats. Coverage from the left, meanwhile, often highlighted Fitch’s citing of the Jan. 6 Capitol riot, which would place the blame on conservative Republicans.