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White House Strikes Back After Credit Downgrade, Defending Biden’s Economic Message

The Fitch Ratings agency recently downgraded the long-term credit rating of the United States from AAA to AA+. This downgrade became an immediate source of criticism for congressional Republicans and nonpartisan budget hawks. In response, the Biden administration quickly mobilized a rapid defense, with economic experts inside and outside the administration criticizing the timing and substance of the announcement.

The White House’s pushback aimed to protect Mr. Biden’s economic record amidst positive economic indicators. It also highlighted the critical importance of an improving economy to Mr. Biden’s re-election campaign.

Jared Bernstein, the chairman of the White House Council of Economic Advisers, emphasized that the Fitch decision was arbitrary and outdated. He pointed out the administration’s accomplishments in fiscal policy and economic growth, such as a bipartisan deal to raise the debt limit and reduce federal spending.

The timing of the downgrade coincided with the third criminal indictment of former President Donald J. Trump, which diverted media attention away from it. Additionally, investors largely disregarded the Fitch Ratings move, with Goldman Sachs researchers stating that it should have little direct impact on financial markets.

Fitch cited the expected fiscal deterioration over the next three years, the growing government debt burden, and the erosion of governance as reasons for the downgrade. The agency raised concerns about high-stakes showdowns over raising the nation’s borrowing limit, which have undermined confidence in fiscal management. Fitch also expressed worries about rising costs of Medicare and Social Security benefits and predicted a mild recession by the end of the year.

In response to the downgrade, Treasury Secretary Janet L. Yellen strongly disagreed with the ratings change, calling it arbitrary and based on outdated data. The administration organized a call with reporters to further criticize the decision, highlighting recent economic data and the president’s commitment to spending cuts and tax increases on corporations and the wealthy to reduce budget deficits.

Republicans seized the opportunity to criticize Mr. Biden, with Representative Jodey C. Arrington of Texas, the chairman of the House Budget Committee, calling it a wake-up call to address the rapidly deteriorating financial health and unsustainable debt trajectory of the nation. Fiscal hawks have been warning about the growing national debt for years, and the borrowing during the pandemic has exacerbated these concerns. The cost of federal borrowing has risen due to the Federal Reserve’s interest rate increases to combat inflation.

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