“Shark Tank” star Kevin O’Leary, renowned as a blunt, plain-spoken business magnate, laid it bare for Americans wasted no words on Wednesday in acknowledging the gravity of Fitch Ratings’ recent downgrade of the U.S. government’s credit rating: “It’s bad.”
This verdict from the founder of O’Leary Ventures lands amid mounting concerns sparked by Fitch Ratings’ recent lowering of the U.S. government’s long-term foreign currency issuer default rating. The downgrade from AAA to AA+ was a direct result of “the expected fiscal deterioration” in the nation due to the rising debt burden and repeated political standoffs over the debt ceiling.
CNN is now blaming the US credit downgrade on Jan 6 pic.twitter.com/pqVtn3Swvh
— Jack Poso 🇺🇸 (@JackPosobiec) August 2, 2023
While some, like Treasury Secretary Janet Yellen, would argue that Fitch’s evaluation is “arbitrary and based on outdated data,” many Americans join O’Leary in his refusal to sugarcoat this latest financial news. They see the credit rating downgrade as a symbol of the U.S. dollar’s weakened standing and potentially perilous effect on the nation’s future.
Even more ridiculous is that Fitch has the outlook as "stable."
— Peter Schiff (@PeterSchiff) August 2, 2023
O’Leary’s ominous predictions about the national economy could not be more explicit. “When you downgrade the U.S. economy,” he explained, “you are losing a little faith in the U.S. dollar and the U.S. Treasury bill.” He noted that the impact of this reality could be quite profound, especially for average Americans: “The cost of capital goes up. What it costs for us to borrow money to fund the government and the deficit goes up.”
Wall Street has taken a hit as the effects of the downgrade ripple through the economy. The Dow Jones Industrial Average dipped on Wednesday, leading many Americans to rethink short- and long-term economic choices. The fear is that such a decline could herald the beginning of a recession, a concern echoed by Fitch Ratings in their evaluation.
O’Leary’s remarks also spotlighted government spending, citing the CHIPS Act and the Inflation Reduction Act as significant contributors to the fiscal strain that catalyzed the credit rating downgrade. Despite Fitch’s clear warning, the current administration appears to continue along a trajectory of budgetary irresponsibility, raising questions about the nation’s future solvency.
However, for all the well-founded concern, it’s not all doom and gloom. Despite O’Leary’s warning, others argue that the downgrade will not significantly impact the U.S. government’s borrowing ability. That said, it should caution those at the helm that the world is watching and that our nation’s fiscal path is unsustainable.
The downgrade, therefore, should not be seen as an end but rather as a wake-up call for lawmakers to roll up their sleeves and work toward restoring the country’s fiscal health. That is if they’re willing to heed the alarm bell that has now, undeniably, been rung.