Credit in Crisis – Manchin Points Fingers in Rating Rumble

(DailyVantage.com) – Sen. Joe Manchin (D-WV) claimed that the Fitch Ratings downgrade of America’s credit rating was due to a failure in government leadership. The rating agency downgraded U.S. credit from AAA to AA+, the second decrease in American history, citing an increasing U.S. debt load and weak governance following a Congressional stalemate on a debt ceiling agreement due to disagreements between Republicans and Democrats.

While U.S. Treasury Secretary Janet Yellen was critical of the decision by Fitch and believes that it does not change the security of the U.S. Treasury, Manchin believes that both political parties and the Executive Branch are to blame for the erosion. Manchin added that every American would suffer if politics continued to hinder policy decision-making.

Some investors could believe now that the U.S. is unlikely to pay off its debt, meaning that the government could lose some of its ability to spend on social welfare programs and economic stimulus. However, analysts are confident that the reputation of U.S. Treasury bonds will continue to have stability as a well-known safe asset.

While the fiscal health of the U.S. could become increasingly poor due to politics, economists also focus on monetary policy. If inflation continues to be a problem in the long term, this could indicate poor decision-making on the part of the Federal Reserve.

The comments from Manchin on the economy come ahead of the 2024 general election. Republicans can retake the U.S. Senate, which could mean further debt-ceiling disagreements in the future, by winning Manchin’s seat in West Virginia and Tester’s seat in Montana. While Manchin has narrowly won West Virginia, a Republican-dominated state, he could lose against Republican Gov. Jim Justice. Polling from East Carolina University gives Justice a 22-point lead on Manchin and gives Mooney (R) a 1-point lead. Despite comments on the credit rating and other critical remarks against the Biden administration, Manchin will have a difficult path if he wishes to get re-elected to the Senate.