Fitch Ratings on Tuesday downgraded the U.S. government's credit rating, noting that its fiscal health is expected to deteriorate over the next three years as it grapples with an increasing debt burden.
The rating was cut one notch to AA+ from the highest possible AAA, prompting an immediate reaction from the administration of President Joe Biden. It is the first downgrade since August 2011, when Standard & Poor's also cut the top U.S. rating by one notch.
"In Fitch's view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025," the agency said in a statement.
The agency added that the repeated political standoffs in the United States over debt issues and "last-minute resolutions have eroded confidence in fiscal management."
The decision was made after the White House and Congress averted a default in June after striking a deal to suspend the federal government's borrowing limit at the last minute. Fitch had warned of a possible cut in May.
White House spokeswoman Karine Jean-Pierre said, "We strongly disagree with this decision."
"The ratings model used by Fitch declined under (former) President Trump and then improved under President Biden, and it defies reality to downgrade the United States at a moment when President Biden has delivered the strongest recovery of any major economy in the world," she said in a statement.
The downgrade could undermine confidence in U.S. debt and lead to further rises in interest rates.
Treasury Secretary Janet Yellen also reacted sharply to Fitch's decision, saying the change is "arbitrary and based on outdated data."
Yellen said in a statement that the cut will "not change what Americans, investors and people all around the world already know: that Treasury securities remain the world's preeminent safe and liquid asset, and that the American economy is fundamentally strong."
