Ford School economics professor Justin Wolfers says U.S. politicians are responsible for the recent downgrading of the country's long-term foreign-currency issuer default rating by Fitch Ratings, from AAA to AA+.
Wolfers told International Business Times that Fitch is simply believing what politicians are saying. During the latest round of debt fights in Washington, Republican legislators said they were comfortable defaulting on the debt. When one party begins to act recklessly with the debt and indicates it may not pay it, Wolfers said, then the creditors will lose confidence. Ultimately, a lower credit rating means the cost of borrowing will likely increase for the U.S. government.
Wolfers told BBC there was little doubt that the US economy was healthy enough for the government to meet its obligations - and has only strengthened since Fitch put the country on review in May. But he said the report was a reminder that confidence in the US as a borrower is weakening as a result of events like the 6 Jan insurrection and Republican threats to default.
"There's a general sense, and I know how over-wrought this sounds, that the threats to American democracy are larger and more real than they've been in my lifetime," he said.
Credit downgrade 'puzzling' and unwarranted', BBC, August 2, 2023
Why Fitch's Credit Downgrade Is A Serious Debt Warning, International Business Times, August 2, 2023