Fitch Is Right: America's Economic Management Is Unstable.

The economy's in fine shape, but somebody's trying to wreck it, and Fitch, like Standard & Poor's before it in 2011, is pretending it doesn't know who.

Would you buy a Treasury marketable security from this man?

“The political brinksmanship of recent months,” Fitch said this week,

highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy. Despite this year’s wide-ranging debate, in our view, the differences between political parties have proven to be extraordinarily difficult to bridge.

Okay, that isn’t what Fitch said this week. It’s what Standard & Poor’s said in 2011, when it lowered the United States’s credit rating from triple-A to AA+, just as Fitch did this week. (Moody’s, the third of the “big three” credit-rating agencies, also threatened to downgrade U.S. securities in 2011, but in the end it did not.)

I pulled this cheap trick for two reasons. First, I wanted to demonstrate that Fitch downgraded the United States for precisely the same reason that Standard & Poor’s did in 2011. And second, I wanted to demonstrate that, like Fitch in 2023, Standard & Poor’s in 2011 was honest enough to say American governance is dysfunctional to the point of undermining the nation’s creditworthiness, but not quite honest enough to say that the reason is because Republicans are intransigent on raising taxes and reckless in bringing the United States to the brink of default, and that the possibility can no longer be ignored that one day Republican extremism will force the United States into at least a temporary default, as it nearly did in June.

The soundness of Fitch’s downgrade has been called into question by various liberal economists, including Treasury Secretary Janet Yellen and New York Times columnist and Nobel laureate Paul Krugman. I agree with them that the economy is in rude health and that Fitch has no great reason to predict a recession in the fall. But I also agree with Fitch that Republican pathologies represent a constant threat—a threat that has only gotten worse over the past dozen years, as Republicans have gotten even more unhinged than they were in 2011. And I further believe that President Joe Biden isn’t doing enough to counter the next debt-ceiling showdown in January 2025. That’s the subject of my latest New Republic piece. You can read it here.