August 2, 2023
Congress is currently in the “find out” phase.
And all of us taxpayers are likely the ones who are going to take the hit.
One of the big three credit rating agencies, Fitch went and did it. They downgraded the perfect AAA credit rating of the United States down to AA+.
Stand by – I’m going to tell you exactly why this is happening – Congress — but first – let me explain what this means for you.
You know how you get a credit score and that determines whether you even qualify for a loan and how much it’ll cost you to borrow that money? Well, the us gets a credit score too. The top three credit rating agencies are Fitch, Moody’s and S&P. And if one of them downgrades our credit rating – it’ll cost all of us taxpayers more money when the us needs to borrow what we need to make the payments on that the massive $32.6 trillion of debt we’re sitting on. That means the us will have to pay higher interest rates on treasury bonds, notes and bills. That’s coming out of your pocket. To give you some context – the treasury department paid a record $475 billion in interest payments alone on the national debt in 2022. With this new lower credit rating – those interest costs could go up.
With this Fitch move –two out of the big three credit rating agencies have downgraded the United States’s credit. In 2011 when we came close to defaulting on our debt –S&P stripped the US of it’s perfect AAA credit rating and downgraded it to AA+. To this day S&P still has not returned the United State’s AAA credit rating and the government accountability office estimated that the downgrade and the debt ceiling standoff back in 2011 raised the Treasury’s borrowing costs by $1.3 billion.
You may be wondering why Fitch downgraded US credit rating? Congress.
Mainly – they say its two things. “erosion of governance” and “rising general government deficits.”
Fitch says “the repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management.” Basically – all that kicking the can down the road and making the debt ceiling a political issue that congress is famous for just came back to bite them – and us. The other problem fitch sees is the US deficit – which keeps going up. Fitch says it’s because of consistent “weaker federal revenues, new spending initiatives and higher interest burden.” Basically, the government isn’t brining in enough tax revenue, congress keeps cutting taxes, and then keep spending more on new programs even though our interest costs keep going up.
And it’s not like Congress didn’t know this was coming…Fitch sent two letters to Congress warning them not to mess with the debt ceiling. In fact, I told you about both of those warnings in these videos in May and June.
Read more from fitch about the downgrade here.
Read the Treasury Dept. report on interest payments in 2022 here.
Read more about the GAO report from 2011 on cost of Congress’s negotiation standoff & downgrade here.
