AMAC Exclusive – By Shane Harris
While the Biden administration and its allies in the mainstream media are insisting that “Bidenomics” is revitalizing the U.S. economy, the first downgrade of U.S. credit in more than a decade is just the latest news to seriously undermine that claim.
Last week, Fitch Ratings, one of the “big three” ratings agencies that ranks investments based on the likelihood of default, downgraded the United States’ long-term credit rating from the highest AAA classification to AA+. The reason for the change, Fitch said, was a “steady deterioration in standards of governance.”
Furthermore, Fitch said, “repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management, while “the government lacks a medium-term fiscal framework, unlike most peers, and has a complex budgeting process.”
In other words, the U.S. government is really bad at handling money, and it’s showing no signs of improving.
The news last week marked just the second time one of the big three agencies has downgraded U.S. credit. The first was in 2011, when Standard & Poor’s downgraded U.S. debt as the Obama administration’s gargantuan spending programs began to send government debt spiraling out of control.
As The Wall Street Journal pointed out, the debt problem is far worse today than in was in 2011, and shows no signs of improving anytime soon. Whereas the ratio of U.S. debt held by the public to GDP (a measure commonly used by economists to assess a nation’s debt situation) in 2011 was 65.5 percent, that figure ballooned to 79.4 percent prior to the pandemic, and is predicted to reach 98.2 percent this year.
Following the previous downgrade, the stock market saw a sharp decline as investors bolted for the safer waters of the bond market. Although stocks look more resilient this time around, they have still dipped slightly, and public pessimism about the state of the economy remains high.
News of the downgrade couldn’t have come at a worse time for the White House and Congressional Democrats, who have been hitting the airwaves to promote “Bidenomics” – their term for the supposed economic successes of President Joe Biden. Touting low unemployment numbers and declining inflation, Democrats are hoping that their Bidenomics push will flip the script on Biden’s dreadful economic approval numbers.
But that campaign seems to be running up against the economic realities facing everyday Americans – realities that are reflected in Fitch’s credit rating downgrade. Although inflation has indeed declined, prices have not. Moreover, the rate of inflation still remains well above the Fed’s target rate of two percent, while prices for everything from a gallon of gas to a carton of eggs remain far above where they were when Biden took office, and show no sign of declining.
Democrats, however, responded to the downgrade not with self-reflection, but with defiance.
Treasury Secretary Janet Yellen called the downgrade “entirely unwarranted,” further claiming it was “arbitrary and based on outdated data.”
White House Press Secretary Karine Jean-Pierre also called into question the model Fitch used to make their assessment, before then blaming it on “extremism by Republican officials.”
Senate Majority Leader Chuck Schumer similarly blamed Republicans, saying in statement that their “reckless brinksmanship and flirtation with default has negative consequences for the country.”
Neither Schumer nor any other Democrat exhibited any sense of responsibility for the wild spending that contributed to the downgrade – or have indicated they are willing to take the necessary steps to improve the country’s credit rating.
That could be bad news as the federal deficit in the first nine months of the fiscal year hit $1.39 trillion – a staggering 170 percent increase from a year earlier. The cost of servicing the U.S. debt also jumped 25 percent in the same time period to $652 billion.
There is also a possibility that the national debt could skyrocket even higher than most economists are predicting in the years ahead.
As a shocking Goldman Sachs analysis revealed earlier this year, the actual cost of Democrats’ so-called “Inflation Reduction Act” is likely to be somewhere around $1.2 trillion – more than four times as much as the Congressional Budget Office predicted. If estimates for Democrats’ other big spending policies are also that wildly off base, the country’s debt problem could already be far worse than any official numbers suggest.
The uncomfortable truth for Biden and his fellow Democrats is that credit downgrades, high inflation, and a dismal outlook for the future are what Americans really think of when they hear “Bidenomics.” As much as they would like to manufacture the illusion of a strong economy, reality and cold, hard facts just keep getting in the way.
Shane Harris is a writer and political consultant from Southwest Ohio. You can follow him on Twitter @ShaneHarris513.
