Experts on U.S. Credit Downgrade: ‘What Took You So Long?’
Not everyone was surprised by the bombshell Fitch Ratings dropped on the U.S. credit score this week. This storm over America’s mountains of loans had been brewing for a while, economists say. And Washington has no one to blame but itself.
“Shocker!” Dave Brat, dean of Liberty University’s School of Business, said sarcastically when the topic came up on “Washington Watch” Wednesday. “I mean, the idea that no one knows that we’re going to be $50 trillion in debt in 10 years when it’s posted on CBO, you know what? What took you so long?” the former congressman told guest host Jody Hice.
As far as Brat is concerned, “The ratings agencies are not to be taken seriously. They missed the entire ’07-’08 financial crisis. … They should have probably been sued for dereliction of duty. And so now they’re finally coming in late. … And the idea they posted that Medicare is insolvent in 10 years, Social Security is insolvent in 10 years. Shocker! You and I and anybody that has a conscience has been reporting that for years …”
What is news, he and other experts say, is the drop in American productivity. “[It’s] been down 40 years in a row,” Brat pointed out. “And that’s not me [saying that]. That’s the leading expert in economics on productivity at Northwestern University, Robert Gordon. If people want to get serious about the issue and [recognize] we’re on the wrong course, [they need to understand:] you’re not going to grow your way out of this. We have serious choices to make.”
And it’s not just the Democrats’ fault that we’re in this mess, Brat is quick to point out. There’s plenty of blame to go around, especially after the House majority helped Biden’s party pass another multi-trillion-dollar boondoggle in the so-called Fiscal Responsibility Act. “The Republicans just went in with the Democrats on a $7 trillion budget this year. [And now, after the trillions we burned through in COVID] we’re just continuing the spending charade. And I think you know just as well as me, that’s what’s going on here. [The Republicans who voted for that deal] put our country in a tremendously bad place.” And the downgrade is just more proof of that, he argued.
Congressman Bob Good (R-Va.) has been ripping the Democrats’ accomplices since the May 31 deal. “Every Republican who voted for that,” he told Family Research Council President Tony Perkins last month, “in my view, owns the Biden agenda from a spending standpoint.” But, he pointed out, “Speaker [Kevin] McCarthy said that the spending levels in the FRA were the ceiling, not the floor, and we could go lower — and we would use the appropriations process to do that. So we’re trying to hold him to that commitment.”
Others, like Rep. Mark Alford (R-Mo.), think the White House should still shoulder the lion’s share of responsibility for the ratings crash. “Let Joe Biden take credit for it,” he argued. “This is Bidenomics, right? He should be bragging about this.” The Missouri congressman ticked off a laundry list of ways the administration saddled the U.S. with debt. “He, with a wink and a nod, welcomed seven million illegal aliens into — create[ing], not diversity, but instability in our economy. He demonized fossil fuels. He tried to push EVs down our throats and ended up putting the target on the backs of the American people. Got inflation to a 40-year high, which is a tax on everyone. … And so what’s going to happen in two years? Are [Democrats] going to come back and want us to raise the debt ceiling again?”
Maybe, Hice half-joked, they’re hoping the American people will “forget” the crunch they’re experiencing. According to Alford, fat chance. “Look, the American people aren’t dumb. I know people in the fourth Congressional District have really sacrificed a lot over the last two years, especially [the last] year and a half. The price of food, fertilizer, and fuel have all skyrocketed. If you look at the average price of things from when Trump was in office to now, it’s up 16% on average. … They know that they cannot afford to get out of the grocery store half the time. They know they can’t still afford to fill up their trucks, and it’s going to get worse.”
As for the direct impact of Fitch’s AA+ label, Brat says, “The stock market is going to react here, but we’re in for probably a lost decade. … China has way more capital to work with than the United States of America. And now human capital, the kids in K-12 education. … We’re way behind the curve.” And this rating, he warns, will only put more “downward pressure” on the United States. “… [It] makes the cost of our investments more, etc. We’re going to have to work harder to attract investments in the U.S. Treasury.”
For now, though, Brat insists, America “is still the safest place to put your money.” But that doesn’t mean America isn’t “in for some deep troubles for the next decade.” If there is a solution, he points out, it’s that conservatives have House. “So McCarthy needs to grab the bullhorn [like he promised] he would [and cut spending].”
Suzanne Bowdey serves as editorial director and senior writer at The Washington Stand.