The United States has been downgraded! Did Biden's economics fail? Debt | Inflation | United States

The United States has recently been poured with a basin of cold water.

International rating agency Fitch has downgraded the default rating of long-term foreign currency issuers in the United States from AAA to AA+, marking the second credit rating downgrade in US history.

Fitch Ratings stated that the downgrade reflects a deterioration in US fiscal expectations over the next three years. Although US government officials are "indignant" about this, many voices believe that the downgrade is "justified".

Looking back at the performance of the US economy in recent years, high inflation, soaring debt, and persistent deficits... Waves of "headwinds" have not only weakened the political credibility of American rulers, but also raised doubts about the so-called "Biden economics" from multiple sources.

Bidennomics violates market economy principles

Since taking office as the President of the United States, Biden has made a series of significant economic strategic adjustments, and his advocated economic policies have gradually been dubbed "Biden economics".

Contrary to the "trickle down economics" that advocates widespread tax cuts around the wealthy and large corporations to stimulate growth, the three key principles of "Biden economics" are: public investment in the United States, empowering and educating American workers, and providing a fair competitive environment for small businesses.

"Even if there is what US Treasury Secretary Yellen calls a 'veneer' of modern supply side economics, Biden economics cannot be called an economics at all." Liu Ying, a researcher at the Chongyang Institute of Finance at Renmin University of China, told China News Service that it is a direct link between China and the United States. In essence, it has no theoretical support, let alone successful practical experience.

Ma Xue, Associate Researcher at the Institute of American Studies at the China Institute of Modern International Relations, pointed out that "Biden economics" is achieved through the active expansion of government spending and the use of industrial policies to achieve multiple development goals. It advocates industrial policies, where the government selects winners and directs resources to industries that are crucial to national interests, rather than leaving them to the market for selection. "This is a shift in the United States' loyalty to the free market to more frequent government intervention."

Gao Lingyun, a researcher at the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, told China News Agency that breaking away from the framework of a free market economy and frequently intervening in market competition has violated the fundamental principles of market economy that the United States has always believed in.

"Since it cannot be called an economics, it can be summarized as the implementation of industrial policies and trade protectionism." Liu Ying said that from Biden's measures such as increasing public investment, promoting education, promoting competition, and reducing business costs, a very clear industrial guidance can be seen.

In addition, it is not difficult to see from the bills introduced by the Biden administration in the past one or two years that the Inflation Reduction Act is not aimed at reducing inflation, but at encouraging the development of new energy and investing in and subsidizing the domestic new energy industry in the United States; The Chip and Science Act aims not to support chip development and promote competition, but to establish small courtyards and suppress other countries in order to protect their relatively weak domestic industries and technologies, with a strong color of trade protectionism.

The stubborn illness of "three highs and one low" is difficult to solve

Not only is there a lack of theoretical support, but in practical performance, Biden economics is also difficult to claim success.

Add more than 13 million job opportunities; Inflation has been declining for 11 consecutive months... As the 2024 presidential election approaches, Biden's economic performance report has entered the public eye. Although the situation has improved, many experts believe that inflation in the United States is still at a high level, the risk of recession is still present, and deep-seated economic contradictions are difficult to conceal.

Since taking office, Biden has successively launched trillions of dollars in "massive" economic stimulus policies. Under a large amount of fiscal expenditure, inflation in the United States continues to soar. In response to high inflation, the United States had to raise interest rates sharply, which led to high debt risk and financial risk in the United States and increased recession risk. Since March, multiple banks in the United States have gone bankrupt, and aggressive monetary tightening has been the catalyst for the banking industry's turbulence.

"Controlling inflation and economic growth cannot be achieved simultaneously, and the United States is in a dilemma," said Gao Lingyun.

The inflation issue is unresolved, and the debt issue is even more thorny. Liu Ying believes that the US federal government's debt has repeatedly reached new highs, and the Biden administration has made outstanding contributions. Especially from June 3rd to July 3rd this year, in just one month, US Treasury bonds surged nearly trillions of dollars, which is unprecedented in history. At present, the US debt has exceeded $32.32 trillion, and its sustainability is questionable.

Ma Xue believes that with rapidly rising interest rates, the interest paid on government debt will grow even faster, and within a decade, the interest paid by the US government will exceed spending on social programs such as defense and healthcare.

As the debt rolls on, the US deficit rate also rises unprecedentedly. According to data from the US Treasury Department, from October 2022 to June 2023, the US government's fiscal deficit was approximately $1.4 trillion, nearly three times the level of the same period last year.

Liu Ying bluntly stated, "The steep debt is a fiscal 'cliff', followed by steep interest rate hikes and predictable economic recessions. The downgrade of the US credit rating precisely proves the failure of Bidennomics.".

"Biden is not actually from an economics major. Despite having Yellen, the first female chairman of the Federal Reserve and the first female Treasury Secretary of the United States, she still couldn't help him solve his economic problems." Liu Ying said that Biden's economics brought about high inflation, high debt, high deficit, and undoubtedly low growth, creating a "three highs and one low" situation.