Weekly News Blast | July 30 - Aug 6

US Treasury Secretary expressed her disagreement with Fitch Rating's recent decision to downgrade the U.S.' longstanding top credit rating (Federal Reserve, Wikimedia Commons)

Fitch Downgrades the U.S. Credit Rating for the First Time in Decades

On August 1, the Fitch Ratings agency downgraded the U.S. credit rating from the highest (AAA) to the second highest (AA+). In a statement justifying their decision, Fitch cited “the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance.” The last concern likely refers to the June political battle over the debt ceiling that threatened to push the country into default on its debts. Now, after years of US Treasury bonds being the safest international investment, things have begun to change.

As one of the three big independent credit rating agencies (alongside Standard & Poor’s and Moody’s), Fitch’s credit ratings significantly impact international financial markets. Many financial institutions (such as pension funds, insurance companies, and banks) rely on these ratings to determine whether a financial investment will be profitable and safe. With both Fitch and Moody rating the U.S. credit at the second highest level (the latter having downgraded the U.S. in 2011 after a similar debt ceiling standoff), there is increasing worry about the future of the U.S. economy.

However, since the announcement, many economists have come out against Fitch’s decision. Current Treasury Secretary Janet Yellen called the decision “arbitrary” and “entirely unwarranted,” claiming the move was based on “outdated data” from 2018-2020. Stephanie Kelton, a professor of economics and public policy at Stony Brook University, added that Fitch had provided very little hard evidence to back up its concerns over the declining state of the U.S. economy. Still, Fitch has stood by its decision. “The numbers speak for themselves,” said Richard Francis, co-head of Americas sovereign ratings at Fitch. Although, he was quick to assure that the U.S. economy is still strong. “Double A plus is the second highest rating we have,” Francis said. “We’re just saying we do not think the underlying fiscal story and the governance is compatible with triple-A anymore.”

Trump Pleads Guilty In Federal Election Fraud Case

For the third time in the past four months, former president Donald Trump pleaded not guilty in federal court, this time on charges that he orchestrated a plot to overturn the 2020 presidential election. The former president appeared before Magistrate Judge Moxila A. Upadhyaya in Washington D.C.’s federal courthouse two days after Justice Department special counsel Jack Smith indicted him on four charges, including conspiracy to defraud the United States, conspiracy to obstruct an official proceeding, obstruction, and conspiracy against the right to vote and to have one’s vote counted. These charges center around Trump’s attacks on what Smith called a “bedrock function of the U.S. government,” namely voting.

Since Smith publicized the charges, Trump has portrayed the case as a “witch hunt” intended to hinder his presidential campaign. “This is a very sad day for America,” Trump told reporters after the arraignment hearing. “This is a persecution of a political opponent.” However, this is not the first case brought against Trump in the past couple of months. Trump has previously pleaded not guilty to federal charges involving the illegal retention of classified presidential documents and the falsification of records in connection with hush-money payments to a porn star. There is also movement by state prosecutor Fani Willis to file similar obstruction charges against Trump in Georgia. Despite this, Trump remains the Republican front-runner. Nearly 47 percent of Republican voters said they would support his presidential bid, and almost three-quarters of Republicans indicated that they believe the charges brought against Trump were “politically motivated.” About half of Republicans did say they would vote against Trump if he is convicted of a felony, but the outcome of the case is still yet to be decided. The next hearing for Trump is set for August 28, where District Court Judge Tanya Chutkan is expected to formally set a trial date.

Former Pakistan Prime Minister Arrested On Corruption Charges

On August 5, former Pakistan Prime Minister Imran Khan was sentenced to three years in jail on corruption allegations. The verdict centered on charges that Khan had illegally sold presents from foreign dignitaries and concealed more than $600,000 worth of profit. “The allegations against Mr. Khan are proven,” said Judge Humayun Dilawar, who announced the verdict. “His dishonesty has been established beyond doubt.” This recent case is just one in a string of nearly 150 legal cases against Khan since he was removed from power by a no-confidence vote in 2022.

However, many from Khan’s party, Pakistan Tehreek-e-Insaf (PTI), have alleged that the ruling was illegitimate and politically motivated. Since the no-confidence vote, Khan had been involved in a major political showdown with the military, moving his base to protest against the military establishment. With the recent sentencing (and the subsequent possibility of Khan losing his ability to participate in politics), the PTI argued that the opposition utilized a biased legal proceeding to shut down the PTI’s primary candidate. In a statement, the PTI called the sentencing “the worst example of political revenge,” while Intazar Hussain Panjutha, Khan’s lawyer, claimed that “the accused was never given the opportunity to defend himself.” Still, the current administration has denied all such claims. “You have to be accountable for your deeds in law,” said Marriyum Aurangzeb, Pakistan’s minister of information and broadcasting. “This has nothing to do with politics. A person who has been proven guilty by the court has to be arrested.”

Since the sentencing, the PTI has released a pre-recorded video of Kahn in which he denies all wrongdoing and encourages his supporters to protest the ruling. “I have only one appeal: don’t sit at home silently,” he said. “I am struggling for you and the country and your children's future.” While there was some movement amongst his base, there was not the same level of protests seen before Khan was arrested, hinting at the growing power of the military. In the meantime, Khan and his lawyers have alleged that Judge Dilawar was biased against them and are likely to appeal the ruling. Currently, Khan is at a high-security jail in Punjab province, infamous for its harsh conditions, where he will remain until the appeal.