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Fitch Downgrades the US Rating to 'AA+'
- tekla 3y agoFitch really does not like the repeated debt limit drama.
- intrasight 3y agoMoody's likes it even less. They downgraded to AA+ some time ago, and for the same reason.
- Cruncharoo 3y agoThat was S&P. Moody's still rates the US 'Aaa'.
- intrasight 3y agoI stand corrected
- cchance 3y agoIt's almost like congress holding the fucking debt limit hostage every few months isn't good for the rating or the country as a whole.
- gumby 3y agoLet's be real: it's only part of congress.
- revscat 3y agoOn HN holding one party more culpable than another tends to garner downvotes and flags.
- epgui 3y agoReality has a well known _ bias.
- cubefox 3y agoFlags should seriously be removed. They only serve for mindkilled censorship voting by political partisans.
- macintux 3y agoThe Democratic Party has historically not opposed raising the debt limit, so this is one of the few occasions where “both sides” is objectively wrong. (I’d argue that “both sides” thinking is usually lacking in objectivity, but this seems unarguable.)
- version_five 3y agoAm I reading the insinuations properly, that people are blaming Republicans for the rating change because they dare to question printing unlimited money, and belive if Republicans were more "responsible" and just allowed money to be printed unchecked there would be no problem? I see no evidence that either party wants to restrain spending when in power, but pretending this is a partisan issue and that one party is at fault for questioning spending as apparently some are doing is reality distortion to a new extreme.
- sagarm 3y agoRepublicans specifically want to use the debt ceiling as a way to extract concessions when they don't have both houses of Congress.
- WWLink 3y ago> people are blaming Republicans Well yea of course they are. You act like that's some kind of terrible thing to do, lol.
- throw0101a 3y ago> Am I reading the insinuations properly, that people are blaming Republicans for the rating change because they dare to question printing unlimited money, and belive if Republicans were more "responsible" and just allowed money to be printed unchecked there would be no problem? If the GOP has an issue with "printing unlimited money", perhaps they should have cut spending when they had full control of Congress and the White House, rather than implementing cut taxes and boost spending: * https://en.wikipedia.org/wiki/Tax_Cuts_and_Jobs_Act https://en.wikipedia.org/wiki/Tax_Cuts_and_Jobs_Act The GOP only has an issue with "printing unlimited money" when there is a Democrat in the White House. The Republicans were also quite adamant on spending control during the Clinton (Democrat) years: * https://en.wikipedia.org/wiki/1995–1996_United_States_federal_government_shutdowns https://en.wikipedia.org/wiki/1995–1996_United_States_federa... But much less so under the Bush (Republican) years: * https://en.wikipedia.org/wiki/Bush_tax_cuts https://en.wikipedia.org/wiki/Bush_tax_cuts Reminder: it was under a Democratic president (Clinton) that the US had a budget surplus: * https://www.brookings.edu/articles/a-surplus-if-we-can-keep-it-how-the-federal-budget-surplus-happened/ https://www.brookings.edu/articles/a-surplus-if-we-can-keep-... * https://en.wikipedia.org/wiki/Economic_policy_of_the_Bill_Clinton_administration#Deficits_and_debt https://en.wikipedia.org/wiki/Economic_policy_of_the_Bill_Cl... And it was lost under a Republican president. So yes: it is one particular party that is more of the issue.
- onos 3y agoFor sure. Possibly the magnitude of our debt is an issue too.
- aionaiodfgnio 3y agoWe don't need to speculate. >Ratings Downgrade: The rating downgrade of the United States reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance relative to 'AA' and 'AAA' rated peers over the last two decades that has manifested in repeated debt limit standoffs and last-minute resolutions.
- gjsman-1000 3y agoIt doesn't take an economist to take one look at statistics like this (among others) and think, "that doesn't look promising." https://fred.stlouisfed.org/series/A091RC1Q027SBEA https://fred.stlouisfed.org/series/A091RC1Q027SBEA Or, well, a lot of just general statistics around the debt once you consider what they literally mean. https://www.usdebtclock.org https://www.usdebtclock.org
- creato 3y agoApparently you do, because that chart shows inflation more than anything else. The chart you actually want to make your point is this one: https://www.crfb.org/sites/default/files/Screen%20Shot%202021-05-19%20at%2012.57.37%20PM.png https://www.crfb.org/sites/default/files/Screen%20Shot%20202... Which is still not great, but it isn’t an arbitrary exponential with no context.
- infamouscow 3y agoThere's no incentive to do anything except wait until the last moment. From a game theoretic perspective, waiting until the last moment is the most optimal. Therefore, it will continue to happen until the voters find it so unpopular they begin voting out politicians that behave like this.
- kykeonaut 3y agoDowngrading from a AAA rating to a AA+ rating sounds like the least advantageous from a game theory perspective as well. I wish politicians weren't so short-sided.
- killdozer 3y agoThere's only one side holding the debt ceiling hostage, it's just a conservative problem.
- gjsman-1000 3y agoIronic, considering they literally had the power to raise the debt ceiling for two years while they were in Congress. But it's too much to ask that they have less than a year of foresight. https://www.axios.com/2023/05/23/democrats-debt-ceiling-regrets https://www.axios.com/2023/05/23/democrats-debt-ceiling-regr...
- favorited 3y agoThe would have needed Manchin's support, and without periodic debt ceiling emergencies he wouldn't get as much airtime to advocate for cuts. https://www.washingtonpost.com/opinions/2023/02/07/joe-manchin-debt-limit-spending/ https://www.washingtonpost.com/opinions/2023/02/07/joe-manch...
- kykeonaut 3y agoAgreed. Although progressive politicians, or as I like to call them, the right-light, do contribute their fair share of problems.
- sovnade 3y agoYep - the fact that they listed this at the very top of the reasons above any kind of debt or spending numbers is pretty telling. And they're not wrong
- nostromo 3y agoExcept it's not. > Ratings Downgrade: The rating downgrade of the United States reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance relative to 'AA' and 'AAA' rated peers over the last two decades that has manifested in repeated debt limit standoffs and last-minute resolutions.
- janalsncm 3y agoI believe the “holding the debt ceiling hostage” falls under erosion of governance.
- jsnell 3y agoYes, but there are two other reasons before that (projected fiscal deterioration, high debt burden). So it's in the list of reasons but, not at the "very top".
- piva00 3y agoA high and growing debt burden on the US government has been true for decades, that hasn't changed, what seems to have more impact is exactly the erosion of governance. The constant stand-offs holding the budget hostage isn't a thing that happens with other AAA-rated governments, it's pretty unique to the USA and has been happening constantly for the past decade+. I believe what the other comments mentioning "at the very top" mean is that it's there on the by-line, not buried somewhere else in the report. To me it makes sense to call it "at the very top".
- steve76 3y ago[dead]
- WWLink 3y agoAbout 1/3 of the comments in here are excitedly arguing exactly the opposite - that the brave souls holding the debt limit hostage every year are saving the country. Which of course is bull shit. But here we are.
- nostromo 3y agoPeople will complain about the debt ceiling -- granted, it's kinda dumb -- but it's also the only speed bump left to unlimited money printing. The core issue is the size of the debt. The US is constantly paying off old debt with new debt. Except this year the cost of those funds quadrupled -- which means, even more debt. If interest rates stay high for several years, our national debt will balloon out of control. At a point we'll have no money left for anything but interest on the debt, or we'll just print so much money to pay interest on our national debt inflation will come back with a vengeance. At some point I'd love to see a grand bargain where we 1) raise taxes a bit and 2) lower spending a bit. I'm not holding my breath...
- simple-thoughts 3y agoEven the size of the debt would be ok as long as gdp is growing faster than the debt. It’s not, which means the deficit spending is being used on things that are not growing gdp faster than interest rates on that debt. Like any business, government debt is fine as long as it’s used to fund expenses that have an roi greater than the debt servicing costs. Otherwise there will be a default (tho for government inflation is also an option)
- morepork 3y agoLooks to me like GDP is growing faster than the debt, at least over the past 2-3 years: https://fred.stlouisfed.org/series/GFDEGDQ188S https://fred.stlouisfed.org/series/GFDEGDQ188S
- thrawa8387336 3y agoYou need to look at real GDP not nominal.
- chrchang523 3y agoDo you? I don’t like it, but the government is allowed to pay off the debt with inflated dollars.
- CSMastermind 3y ago> Fitch’s credit ratings do not directly address any risk other than credit risk. > ESG: ... These scores reflect the high weight that ESG has in Fitch's proprietary Sovereign Rating Model. ... https://www.fitchratings.com/topics/esg https://www.fitchratings.com/topics/esg
- frostburg 3y agoIt's somewhat hard to service debt underwater.
- groby_b 3y agoI'm sure you're trying to say something, but until you spell it out, we're left to guess. If what you'd like to say is that you think credit risk and ESG aren't related, well, Fitch disagrees. And rightfully so. Lack of ethics impact credit risk, because it means more graft. Lack of governance impacts credit risk, because it's harder to know where money even went, or to ensure it's well spent. Lack of sustainability means the concern won't exist at some point, which, well, pretty large risk if your credit happens to be long running.
- FloatArtifact 3y agoIsn't even possible for the US to pay off their national debt completely?
- aionaiodfgnio 3y agoSure. The U.S. could run a surplus like it did under Clinton. Surplus & time -> debt paid off. But the only way we know to get back to those days involves raising taxes on the rich. The people ranting and raving about the debt would never agree to raising taxes, so the deficit hawks will continue blowing up the deficit until things fall apart completely.
- Me1000 3y agoSure, but it's not desirable. Among other reasons, federal debt is considered the safest kind of bond an investor can buy. It's nearly the same as parking your money in an FDIC insured savings account, except there's no limit to how much of it you can own. In recent memory corporations, banks, and some investors have made requests that the federal government issue more bonds because the demand is so high.
- mensetmanusman 3y agoThe Covid spending spree has consequences. I wonder in an alternative universe of mass unemployment due to business collapse whether we would still have a AA+ rating but through a different path.
- deleted 3y ago[deleted]
- Rapzid 3y agoMy knee jerk reaction is.. Does this mean anything?
- xyst 3y agoHow reliable are these ratings? In the aftermath of the subprime mortgage crisis we learned their algorithms can be easily beaten (repackaging dog shit securities) or just outright fraudulent.
- janalsncm 3y agoThe ‘07 crisis demonstrated that rating agencies tend to overrate securities, not that the agencies are useless. High bias, normal variance.
- bluefishinit 3y agoI think it's time to revisit MMT: https://en.wikipedia.org/wiki/Modern_monetary_theory https://en.wikipedia.org/wiki/Modern_monetary_theory MMT paired with UBI. You can essentially wipe out all debt by printing as much money as you need, but compensating for inflation by covering everyone's basic living costs. It seems like one of the only plausible ways forward into post-capitalism.
- Me1000 3y agoWhat is this "post-capitalism" you speak of?
- bluefishinit 3y agoBasic needs met for all people regardless of employment status. Eventual post-scarcity, ideally post-inequality.
- WhereIsTheTruth 3y ago"the sharing economy" perhaps? open source lead the way
- TimTheTinker 3y agoThere would be serious, worldwide repercussions involved in tanking the USD. And by flooding the economy with cash, UBI would make the problem worse, not better. Surrounding economic variables (prices, supply, cost of labor, exchange rates, etc.) would ensure that the UBI wouldn't be enough to support people. A planned economy is not the solution either - see every time that's been tried in history. The only solution is a long-term, consistent commitment to conservative fiscal policy -- reducing unnecessary government spending, reducing the debt, balancing the budget and working within it, etc. Anything less is inviting economic trouble.
- bluefishinit 3y ago> A planned economy is not the solution either - see every time that's been tried in history. In case you haven't noticed our current economy also does not work. We are going to have to move to a new system sooner or later. Technology and productivity have reached a point (or are near the point) of being able to provide the basic living essentials to all citizens. The longer we delay accepting that, the more pain we'll all be in for.
- nine_k 3y agoI think that downgrading the US rating is more funny than practical. I can't help but quote this again: «The U.S. has a comparative advantage as a safe financial haven. We have the world’s strongest military and a stable government. Thus, we have a comparative advantage in producing debt, primarily government debt. That is not necessarily a good comparative advantage to have.» (Arnold Kling) If there was time to downgrade US debt it would likely be the time when the US rapidly moved and even outsourced its production to China, shutting down local factories. That was the time when the risk for the US might was increasing, should the US-China relations sour (as they have). But of course downgrading wasn't happening then; I suspect it was the other way around.
- wittenbunk 3y ago>stable government The previous administration attempted a coup to retain power....
- pas 3y agoin less stable countries they even could have succeeded. also said guy was just charged. so, maybe there's some hope for that stability.
- janalsncm 3y agoIn practical terms it may mean it costs the government more to buy dollars.
- janalsncm 3y agoTo me the fact that the US gets to dance around defaulting while still holding a AAA rating shocks the conscience. It’s not sustainable. One of these days there’s going to be an oopsie we just defaulted followed by 1000 articles about why it’s not that bad and we should’ve defaulted a long time ago and it won’t happen again. But the bottom line is if the US government were a person, I’d be a little hesitant to lend him money I needed back. Points about the military and the strong, diverse economy mean nothing to me. They’re true and the US still barely pays it’s creditors.
- hkkwritesgmail 3y agoConsidering the rating agencies put Enron on AAA ...