Fitch Ratings
rattled timbers
in the White House and elsewhere when the firm
downgraded
its U.S. government debt rating from AAA to AA+. While the two other rating firms, S&P and Moody’s, made no change, Fitch set the United States
a notch below
Australia, Denmark, the Netherlands, and Germany, among others, and just above France and the United Kingdom. Some expressed surprise, even though Fitch
advised
in May that the rating was under review.
Among other, more obvious
factors
behind Fitch’s move, could it be that an
aging body
of politicians contributed? As one who will soon turn 90, I know that this question, strange though it may sound on the surface, is worth asking.
MOODY’S DOWNGRADES SEVERAL US BANKS AMID ‘ONGOING STRAIN’ IN THE BANKING SECTOR
As for
reactions
, former Treasury Secretary Larry Summers called the Fitch decision “bizarre and inept.” JP Morgan CEO Jamie Dimon said it was “ridiculous.” The White House suggested that how the economy is doing just now matters most. Press secretary Karine Jean-Pierre
commented
: “It defies reality to downgrade the United States at a moment when President Biden has delivered the strongest recovery of any country in the world.”
To
paraphrase
Shakespeare, “methinks the lady doth protest too much.” Fitch did not focus on this year’s gross domestic product growth. The decision was not about the recovery from the pandemic or lack thereof. Indeed, the action wasn’t just about the Biden administration, but rather the last four administrations.
As Fitch put it: “The rating downgrade … reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden [including state and municipal debt] and the erosion of governance … over the last two decades that has manifested in repeated debt limit standoffs and last-minute resolutions.”
In the resulting chatter, relatively little was said about the record run-up in U.S. debt, which
stood
at around $10 trillion in 2000, $26 trillion in 2019, and $30.9 trillion in 2022. Instead, undue attention went to shorter-term economic data.
As for that other factor, one that may cause politicians and other people to be unconsciously and unduly concerned about the near term, it’s called the “
horizon problem
.” Decision-makers tend to be interested in outcomes that will occur in their lifetimes. It’s less about selfish intentions than natural human thinking.
As we age, the horizon gets shorter. This suggests that debt to be paid 20 years from now doesn’t matter as much for a 75-year-old politician as do new subsidies for electric cars to increase U.S. manufacturing and employment next year.
In today’s 118th Congress, the
average age
among senators and representatives is 63.9 and 57.5, respectively. It’s just a tick younger than the previous Congress, considered the
oldest in U.S. history
. We have a president who is 80 years old. The leading Republican nominee is 77.
Maybe we should encourage younger people to join the fray. They may have to live with what they add to the nation’s large stack of IOUs. Who knows? They may recover our AAA rating.
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Bruce Yandle is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a distinguished adjunct fellow with the Mercatus Center at George Mason University and dean emeritus of the Clemson University College of Business & Behavioral Science. He developed the “Bootleggers and Baptists” political model.
