ECONOMIC POLICY

Credit downgrade shocks Biden aides, as more debt fights loom

By Jeff Stein
August 2, 2023 at 6:37 p.m. EDT

After a private meeting with senior Biden aides in July, analysts at Fitch Ratings sent the administration a draft report outlining their assessment of the federal government’s credit and asking for corrections and notes, according to a Treasury Department official.

The draft did not say whether the ratings agency would downgrade U.S. credit, the official said, and Biden aides were optimistic that their successful handling of a debt ceiling standoff this spring meant that wouldn’t happen. So the officials were shocked on Monday when Fitch announced the downgrade anyway, ignoring objections raised by senior Treasury officials in the two weeks before the final decision.

Senior White House officials, including Treasury Secretary Janet L. Yellen, National Economic Council Director Lael Brainard and Council of Economic Advisers chair Jared Bernstein, spent Tuesday coordinating the administration’s response, which involved striking back at the ratings agency as soon as its analysis was released.

Yet while it caught the White House by surprise, the decision to downgrade U.S. government debt after the spring showdown reflects Washington’s persistent battles over rising federal debt, now projected to approach levels unseen since the end of World War II. Fitch’s warnings, echoed by numerous nonpartisan forecasters, found that the national debt has soared and shows no sign of slowing. In justifying its downgrade, the ratings agency highlighted tax cuts and spending increases over the last several decades, and argued that it is unlikely Congress will act to rein in debt before the 2024 presidential election.

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By Jeff Stein
Jeff Stein is the White House economics reporter for The Washington Post. He was a crime reporter for the Syracuse Post-Standard and, in 2014, founded the local news nonprofit the Ithaca Voice in Upstate New York. He was also a reporter for Vox. Twitter https://twitter.com/jstein_wapo