“Outlook Negative”
One of the “Big Three” credit reporting agencies that rate government bonds and securities on Tuesday issued a warning that the U.S. could lose its coveted AAA status over issues currently hanging over American democracy.
In a “rating action commentary” published just minutes after markets closed Fitch Ratings said it “has affirmed the United States’ Long-Term Foreign Currency Issuer Default Rating (IDR) at ‘AAA,'” but warned: “The Rating Outlook is Negative.”
Why?
In a word, Trump.
“The failure of the former president to concede the election and the events surrounding the certification of the results of the presidential election in Congress in January, have no recent parallels in other very highly rated sovereigns,” Fitch declared, explaining its negative outlook warning. “The redrafting of election laws in some states could weaken the political system, increasing divergence between votes cast and party representation. These developments underline an ongoing risk of lack of bipartisanship and difficulty in formulating policy and passing laws in Congress.”
Fitch also suggested it does not see President Joe Biden getting the support he needs from Congress to fully fund his American Jobs Plan and American Families Plan.
The ratings agency also praised President Biden.
“The economy has recovered much more rapidly than expected, helped by policy stimulus and the roll-out of the vaccination program, which has allowed economic reopening.”
And it cited as one of three possible reason for a downgrade, “A deterioration in governance quality that undermines the integrity of the U.S. political system, with potential negative implications for the effectiveness of the government and institutions in managing the economy and absorbing adverse shocks.”
CNN’s Jim Sciutto said in response to the news, “I don’t think Americans are aware of how much the assault on democracy frightens allies and cheers adversaries. US soft power is built on confidence in the system and that confidence – at home and abroad – has been shaken.”