Members of Congress in Both Fiddle While Our Fiscal House Is on Fire

Fitch Downgrades the United States' Credit Rating

Fitch Ratings announced on Tuesday that it lowered the United States’ issuer default rating from AAA to AA+. It’s the first downgrade of the United States’ long-term credit rating since Standard and Poor’s lowered it in August 2011. That action took place after Congress passed the Budget Control Act, which was supposed to reduce discretionary spending by $1.2 trillion over ten years.

Standard and Poor’s said at the time that the Budget Control Act “falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics.” However, concern was also expressed about our politics. Standard and Poor’s noted, “[T]he downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges…”

Much like our fiscal situation, our politics have only gotten substantially worse since 2011. It all ties together, as Fitch explains in its announcement. “[T]here has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025,” the announcement states. “The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management.”

That’s limited to politics. It doesn’t help that there are conservatives in both chambers who don’t believe that a default would cause substantial harm to the United States economy. It’s quite concerning that this has become, without any evidence to the contrary, a relatively common viewpoint.

Moreover, on fiscal policy, no one is talking about, you know, actual solutions. Members of Congress from both parties seem to have the same plan—do nothing about our short-, medium-, and long-term fiscal problems. As Fitch explains, “In addition, the government lacks a medium-term fiscal framework, unlike most peers, and has a complex budgeting process. These factors, along with several economic shocks as well as tax cuts and new spending initiatives, have contributed to successive debt increases over the last decade.”

I’m all for tax cuts, but one of my biggest regrets about lobbying in support of the Tax Cuts and Jobs Act was that Congress didn’t follow it with reductions in spending. In fact, discretionary spending continued to rise in the aftermath of the 2017 tax cut bill. Kicking the can down the road on entitlements was expected, but I’d hoped Republicans would pull their heads out of the sand on spending. They didn’t.

Then came the COVID-19 spending. The problems with deficits and debt accelerated. Even those who claim to care about spending are actively ignoring the fiscal problems that we face. They may hate the comparison, but they’re no better than President Joe Biden and Democrats on the issue. There’s not much of a distinguishable difference. The longer they wait, the risk of entitlement programs going broke only increases.