According to Bloomberg, Fitch Ratings has recently downgraded the sovereign credit grade of the United States from AAA to AA+. The downgrade was attributed to the "ballooning fiscal deficits and erosion of governance" that have resulted in multiple debt limit emergencies over the past two decades.

The move by Fitch echoes a similar action taken by Standard & Poor’s Global Ratings in 2011, as reported by the Associated Press. The 2011 standoff over the government's borrowing limit led to an increase in US Treasury borrowing costs by $1.3 billion that year, as stated in a 2012 report by the Government Accountability Office.

The recent downgrade of the US credit rating from AAA to AA+ by Fitch Ratings has raised concerns about increased borrowing costs for the country over time. The move appears to have taken US officials by surprise, but it was not entirely unexpected as all three major credit rating agencies had previously warned that the AAA credit grade was at risk, according to an AP report. As early as May, Fitch had put the US credit on 'Rating Watch Negative,' serving as an implicit warning that a downgrade could be imminent.

“Tax cuts and new spending initiatives coupled with multiple economic shocks have swelled budget deficits, while medium-term challenges related to rising entitlement costs remain largely unaddressed. The rating downgrade of the United States reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance relative to ‘AA’ and ‘AAA’ rated peers over the last two decades,” Fitch said

Fitch's report cited "a steady deterioration in standards of governance over the last 20 years" and said "repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management."

According to the statement, the US's debt burden is projected to grow rapidly, reaching 118 percent of its gross domestic product (GDP) by 2025, which is more than 2.5 times higher than the 'AAA' median of 39.3 percent. The report also highlights that the country's debt-to-GDP ratio will continue to rise in the long term, making the US increasingly susceptible to potential future economic shocks.

US Treasury Secretary Janet Yellen responded to the downgrade by calling it 'arbitrary and outdated,' and emphasized that despite the decision, Treasury securities continue to be recognized as the world's leading safe and liquid asset, reaffirming the fundamental strength of the American economy."

In addition to Yellen's remarks, other experts and economy watchers, including Mohamed El-Erian, chief economic adviser at Allianz SE and a Bloomberg Opinion columnist, expressed surprise and puzzlement over the timing and various aspects of the announcement.

Former Treasury Secretary Larry Summers also criticised Fitch. “The United States faces serious long-run fiscal challenges, but the decision of a credit rating agency today, as the economy looks stronger than expected, to downgrade the United States is bizarre and inept.”

“This is a bizarre and baseless decision for Fitch to make now. US governance, by Fitch's measures, had improved during the Biden presidency. It simply defies common sense to take this downgrade as a result of what was really a mess caused by the last administration and reckless actions by congressional Republicans," a senior Biden administration told Reuters.

US officials express surprise at Fitch's downgrade, expect limited impact on borrowing costs. Yields on two-year Treasuries fell after the announcement, while 30-year US debt rose. Democrats blame Republicans for debt ceiling delay, Republicans cite 'Bidenomics' for the downgrade.

US stock futures fall after Fitch downgrade, Asian stocks also lower. Markets show uncertainty over US government spending and the potential consequences of further downgrades.

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