“Bidenomics,” the president’s economic plan for America scoffed at by critics for its massive borrowing, war on domestic energy and huge spike in inflation, received a ruinous thumbs down by financial analysts as the government rating agency Fitch downgraded the nation’s credit rating.
The move will have a disastrous affect on the economy as the interest on the massive U.S. debt, currently at $32.6 trillion with the Fed tacking on an additional $5.1 billion per day, will skyrocket. The downgrade will trickle down into every taxpayer’s wallet not only as their credit card interest and other loan costs go up, but also as their share of the debt, currently at $253,686 per person, hits the stratosphere.
“This is a wake-up call for President Joe Biden's administration,” said the non-partisan Committee for a Responsible Federal Budget. “Whether one agrees with Fitch's decision to downgrade the United States government or not, we are clearly on an unsustainable fiscal path,” said the committee’s chair, Maya MacGuineas. “We need to do better."
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The Fitch downgrade moves the U.S. from the highest rating, AAA, down one notch. Treasury Secretary Janet Yellen, who infamously told Americans that the Biden inflation was “transitory” as they continue to get crushed at the pump and the grocery store, called the move "arbitrary." Congressional Democrats attributed the downgrade on the opposition of some Conservative Republicans to raising the nation’s debt ceiling and proposing cuts to Biden’s record spending spree. The Biden campaign blamed the downgrade to former President Trump who simply said, “Wow!”
"I strongly disagree with the Fitch rating decision," Yellen said. "The change is arbitrary and based on outdated data. Fitch's quantitative ratings model declined markedly between 2018 and 2020–and yet Fitch is announcing its change now, despite the progress that we see in many of the indicators that Fitch relies on for its decision.”
Reacting to the news, the U.S. stock market dropped precipitously. The Dow plunged 348.16 points, or 1%, while the tech-heavy Nasdaq had its worst day since February, dropping 310 points, or 2.2%. The S&P 500 slid 1.4%, its biggest decline since April.
Explaining its downgrade, Fitch cited "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 also reported that the U.S. has had “limited progress” in tackling rising social security and Medicare costs due to an aging population. Social security trustees warned that payments to the nation’s elderly will only be able to continue until 2031. “At that point, the fund will become depleted,” the trustees said.
Despite promises to congressional Conservatives made when he was vying for house speaker, Rep. Kevin McCarthy crossed the aisle to line up Democrat votes to give Biden an unlimited credit card by removing the nation’s borrowing cap until 2025.
In its downgrade report, Fitch predicted that the economy will slip into a mild recession due to “tighter credit conditions, weakening business investment, and a slowdown in consumption” toward the end of the year and into 2024. The agency sees U.S. annual real GDP growth slowing to 1.2% this year from 2.1% in 2022 and overall growth of just 0.5% in 2024. Job vacancies will remain higher and the labor participation rate will still be lower than pre-pandemic levels, which could negatively affect medium-term potential growth, Fitch predicted.