President Joe Biden has made attacking what he calls the “ultra-MAGA” economic platform a core pillar of his 2024 reelection pitch, and Fitch Ratings’s recent downgrade directly pours gasoline on that fire.
Since entering office, Biden has fashioned his economic policies, recently dubbed “Bidenomics,” in contrast with conservative policies he derides as “trickle down.” The president claims to be building the economy from the “bottom up and the middle out,” and though he says not all Republicans fall into this category, he essentially equates the “ultra-MAGA” wing of the party with anyone opposed to his spending packages.
WHAT TO KNOW ABOUT FITCH DOWNGRADING US DEBT
The Biden administration has been making the case that the economy is slowly improving. Inflation has steadily inched back down toward 2021 levels, unemployment has hovered around 4% for over a year, and the Federal Reserve finally announced in July that it no longer expects a recession in the near future.
Still, Fitch specifically cited partisan “gridlock” and clear separation between Republican and Democrat spending priorities as the reason behind the downgrade, which dropped the United States from a “AAA” to “AA+” rating.
The president is currently vacationing in Rehoboth Beach, Delaware, but senior administration officials and the president’s private sector allies have used the downgrade as an opportunity to blame the downgrade on Republicans.
Treasury Secretary Janet Yellen called the downgrade “puzzling” and “unwarranted” while speaking to IRS employees on Wednesday and said that Republicans and Democrats can still find bipartisan accord on spending and appropriations.
“Its flawed assessment is based on outdated data and fails to reflect improvements across a range of indicators, including those related to governance, that we’ve seen over the past two and a half years,” she declared. “Despite the gridlock, we have seen both parties come together to pass legislation to resolve the debt limit, as well as to make historic investments in our infrastructure and American competitiveness.”
White House press secretary Karine Jean-Pierre claimed that Fitch’s decision “defies reality,” even as “President Biden has delivered the strongest recovery of any major economy in the world.
“It’s clear that extremism by Republican officials, from cheerleading default to undermining governance and democracy to seeking to extend deficit-busting tax giveaways for the wealthy and corporations, is a continued threat to our economy,” she added.
Even some Democratic economists, including Obama administration veterans Jason Furman and Larry Summers, who had criticized Biden’s policies as a core inflation driver in the past, rejected Fitch’s decision.
“This is completely absurd,” Furman tweeted Wednesday. “And is more likely to show that Fitch is irrelevant to the views of investors in U.S. sovereign debt than it is to show investors anything about the United States.”
“The United States faces serious long-run fiscal challenges,” Summers added. “But the decision of a credit rating agency today, as the economy looks stronger than expected, to downgrade the United States is bizarre and inept.”
And the Biden campaign gave an even more pointed response to Fitch’s decision, seeking to tie it directly to former President Donald Trump, the likely GOP nominee for 2024.
“This Trump downgrade is a direct result of an extreme MAGA Republican agenda defined by chaos, callousness, and recklessness that Americans continue to reject,” campaign spokesman Kevin Munoz said in a statement. “Donald Trump oversaw the loss of millions of American jobs, and ballooned the deficit with the disastrous tax cuts for the wealthy and big corporations.”
Trump has specifically urged Republican lawmakers to risk default in opposing Biden’s spending priorities.
“I say to the Republicans out there, congressmen, senators, if they don’t give you massive cuts, you’re going to have to do a default,” Trump said in May as the debt ceiling standoff took shape. “I don’t believe they’re going to do a default because I think the Democrats will absolutely cave, will absolutely cave because you don’t want to have that happen.”
However, GOP officials counter that the Biden team is ignoring its own role in Fitch’s decision.
“Fitch called out what American voters have known for years: that Democrats are wildly out of touch with fiscally responsible spending,” one senior Republican aide told the Washington Examiner. “Only one party actually wants to balance the budget. Republicans had to drag Biden, kicking and screaming, to the negotiating table this summer, and now his socialist agenda is directly harming the economy.”
“It takes two to tango,” a second GOP aide simply surmised.
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Though Biden and House Speaker Kevin McCarthy (R-CA) navigated avoiding a default in June, Congress is inching closer to another funding showdown in September, this time with a protracted government shutdown on the line.
The Freedom Caucus and other hard-line conservatives, like Rep. Chip Roy (R-TX), have pressured GOP lawmakers to prepare legislation below the funding levels agreed to in the Biden-McCarthy debt ceiling agreement, and even some Republicans believe that the most staunchly conservative of the party is directly aiming for a government shutdown.
