The United States’ Credit Rating Takes a Hit

Happy Monday! Consider this story of an attack in Montana your annual warning that, although they look adorable, otters are actually quite evil.

Quick Hits: Today’s Top Stories 

  • A group of eleven Russian and Chinese naval ships reportedly patrolled in international waters near Alaska last week, prompting four U.S. destroyers and P-8 Poseidon aircraft to monitor the vessels. U.S. Northern Command said the patrol “remained in international waters and was not considered a threat,” but the incursion is believed to be the largest of its kind to approach the American homeland. The move comes after Russian and Chinese ships patrolled near Alaska’s Aleutian Islands in September, briefly venturing into U.S. waters and leaving after a warning from a U.S. Coast Guard ship.
  • The deadline set by a coalition of West African countries for the junta in Niger to step down and release the nation’s overthrown president passed over the weekend. The Economic Community of West African States (ECOWAS) told the coup leaders they had a week to back off or face a potential military intervention, and the military leaders of the coalition agreed to an intervention plan at a summit last week. That said, political support for such an effort appears to be dwindling in neighboring Nigeria, as members of the Nigerian Senate urge more diplomatic efforts. Meanwhile, Niger’s junta broke off security cooperation with France, which has about 1,500 troops stationed in Niger for counterterrorism purposes.
  • Representatives from 40 countries (not including Russia) met in Saudi Arabia over the weekend for a summit about a peace framework for the war in Ukraine, but came away making little tangible progress. Ukrainian President Volodymyr Zelensky presented his 10-point “peace formula” which received support from allied countries, but Chinese diplomats maintained a ceasefire ought to come before any peace talks move forward. Meanwhile, Ukrainian sea drones struck a Russian naval ship and an oil tanker last week in the Black Sea, putting Russian exports along the sea route at risk. Republican presidential candidate Chris Christie also made a surprise visit to Ukraine on Friday, meeting with Zelensky and calling for more expedited military aid to the country. 
  • Russian opposition leader Alexei Navalny was sentenced on Friday to an additional 19 years in prison on several charges related to fomenting “extremist activity.” Navalny, a longtime critic of Vladimir Putin, was arrested in 2021 after returning to Russia following his attempted poisoning by Russian agents, and he is currently serving a nine-year sentence over fraud charges.
  • A Pakistani court sentenced the country’s former prime minister, Imran Khan, to three years in jail over corruption charges that Khan maintains are the product of political bias against him. Pakistan’s military has cracked down on Khan and his supporters in recent months, and if the court’s decision holds, Khan would be barred from holding office for five years, taking him out of contention in the country’s upcoming elections this fall. Government officials also announced this weekend that elections will likely be delayed as new constituency maps are drawn following a new census.
  • Saudi Arabia and Russia both announced they plan to extend their cuts in oil production through September—the countries will slow production by 1 million and 300,000 barrels per day, respectively. The move will likely push gas prices higher—the national average for a gallon of gas reached an 8-month high in July, according to AAA.
  • The Bureau of Labor Statistics reported Friday that U.S. employers added 187,000 jobs in July—up from 185,000 in June, but still below economists’ expectations. The unemployment rate fell slightly from 3.6 percent to 3.5 percent as the labor force participation rate held steady at 62.6 percent. Average hourly earnings—a measure the Federal Reserve is watching closely in its fight against inflation—rose 0.4 percent month-over-month in July, and 4.4 percent year-over-year. Those figures were the same in June.
  • Special Counsel Jack Smith requested the judge overseeing his case against Donald Trump’s efforts to overturn the 2020 election issue a protective order preventing the former president from publicly disclosing evidence uncovered in his investigation—including personally identifying information. Smith’s motion argued that “if the defendant were to begin issuing public posts using details—or, for example, grand jury transcripts, obtained in discovery here, it could have a chilling effect on witnesses.” He cited a Truth Social post Trump made last Friday that said, “IF YOU GO AFTER ME, I’M COMING AFTER YOU!”
  • The Food and Drug Administration on Friday approved the first pill to treat postpartum depression. The pharmaceutical company Sage Therapeutics said in a statement that it  expects to begin selling the drug—zuranolone, (brand name Zurzuvae)—in the fall, following review by the Drug Enforcement Administration. Clinical studies demonstrated that women who took the pill showed fewer signs of depression after four to six weeks following a two-week, daily course of the drug.
  • Ron DeSantis over the weekend offered his strongest rebuke yet of claims that the 2020 election was stolen. “It was not an election that was conducted the way I think we’d want to, but that’s different than saying Maduro stole votes or something like that, and I think those theories proved to be unsubstantiated,” DeSantis said after a campaign stop in Iowa on Friday. “All those theories that were put out did not prove to be true.” The statement came after Robert Bigelow—a hotel chain owner and one of DeSantis’ top donors—said he wouldn’t donate more money to the campaign until DeSantis moderated his campaign approach.

The U.S. Credit Score Takes a Hit

People walk by the New York Stock Exchange (NYSE) on August 2, 2023, the day after Fitch downgraded the U.S. credit rating. (Photo by Spencer Platt/Getty Images)

At 5:13 pm on Tuesday, as the world’s eyes were focused on the federal courtroom in Washington, D.C. where former President Donald Trump was being indicted for the third time this year, the analysts at Fitch Ratings—one of three major credit rating firms in the U.S.—dropped a bombshell of their own: “Fitch Ratings has downgraded the United States of America’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘AA+’ from ‘AAA’.”

While the historic—but not unprecedented—move brings into focus the fiscal and budgetary challenges facing the U.S. in the years to come, it’s not clear how much it will affect markets long term—or whether it will spur any newfound austerity from lawmakers. Following the hit to the country’s credit, politicians on both sides of the aisle retreated to their corners to point fingers at the other side for their fiscal irresponsibility. 

Fitch’s job—along with Moody’s and Standard and Poor’s—is essentially to give countries a credit score. “They rate government debt and then make an assessment of the ability of governments to meet their financial commitments,” says Romina Boccia, director of budget and entitlement policy at the libertarian Cato Institute. 

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