For months, as congressional Republicans advanced their latest debt ceiling crisis, much of the political and financial world warned GOP leaders that their dangerous gambit risked a series of adverse consequences, including the possibility of a debt downgrade. House Speaker Kevin McCarthy ignored the warnings and proceeded with the scheme anyway.
In early June, Fitch Ratings pointed to the “repeated political standoffs around the debt limit” as factors that “lower confidence” in U.S. governance. Evidently, the agency wasn’t kidding. NBC News reported:
Fitch downgraded its credit rating for the U.S. government, from AAA to AA , two months after the debt-ceiling crisis was resolved. “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,” the rating agency said Tuesday. Fitch said the U.S. appeared to suffer from an “erosion of governance,” pointing to the Washington brinkmanship over the debt ceiling as an example.
If these circumstances sound at all familiar, it’s not your imagination: Exactly 12 years ago this week, a rival credit ratings agency, Standard & Poor’s, also downgraded U.S. debt in response to the original Republican debt ceiling crisis.
As a practical matter, it’s probably best not to overreact to these latest developments. The 2011 downgrade did not do dramatic harm to the domestic economy, though it did push Wall Street lower and made it more difficult for consumers to get auto loans and mortgages.
What’s more, it’s also worth emphasizing that analyses of Fitch’s decision on the merits have been unflattering, and for good reason. Jason Furman, a Harvard economist and the former Director of the National Economic Council, described the move as “completely absurd,” and he had plenty of company.
But there’s also, of course, a political dimension to this. Republican officials have tried to argue that they’re not to blame for what happened, while Senate Majority Leader Chuck Schumer issued a written statement that read, “The downgrade by Fitch shows that House Republicans’ reckless brinksmanship and flirtation with default has negative consequences for the country.” The New York Democrat added, “Republicans need to learn from their mistakes and never push our country to the brink of default again.”
Democratic Rep. Brendan Boyle of Pennsylvania, the ranking member on the House Budget Committee, added in a statement of his own, “Fitch’s decision to downgrade rests on the shoulders of Speaker McCarthy and the extreme MAGA Republicans who openly rooted for default.”
So, which side of the political divide is right? This isn’t a close call.
- Republicans were told they’d likely force a downgrade if they proceeded with their debt ceiling crisis.
- Republicans proceeded with their debt ceiling crisis.
- It led to a downgrade.
For good measure, officials from Fitch reportedly told Biden administration officials that the Jan. 6 attack contributed to the agency’s concerns about the future of American governance.
I can appreciate why GOP leaders want to avoid responsibility for this, but Democrats aren’t the ones who keep creating debt ceilings, and it wasn’t President Joe Biden who launched the Jan. 6 crisis.
The mystery surrounding who’s to blame for the downgrade isn’t a mystery at all.
