In a major surprise sure to spook financial markets Wednesday, a major ratings agency downgraded America’s long-term debt to AA+ from the top tier, AAA, late Tuesday, citing an expected deterioration in the country’s fiscal situation over the next three years.

Fitch Ratings cited the repeated debt-limit fights between Republicans and Democrats on Capitol Hill and the last-minute resolutions that have kept the government in business over the past two decades as justification for the ratings change.

“There has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025,” the agency said. “The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management.”

The last time a major ratings agency downgraded American debt was in 2011, when S&P changed its ratings in the same direction as Fitch. With Tuesday’s move by Fitch, two of the three largest ratings agencies have moved their ratings downward.

The August 5, 2011 move by S&P led to a decline of between 5 percent and 7 percent of all three major American stock market indexes. After hours trading on Wall Street suggested that all three indexes — the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite — will open in the red Wednesday morning.

In addition to Washington’s dysfunctional governance, Fitch cited rising government spending, higher interest burden on the country’s $32 trillion debt, and lower federal revenues from a slowing economy. The firm projects that the American economy will slip into what it describes as a “mild recession” in the final quarter of 2023 and first quarter of 2024.

“The agency sees U.S. annual real GDP growth slowing to 1.2 percent this year from 2.1 percent in 2022 and overall growth of just 0.5 percent in 2024,” the agency said.

The move is sure to complicate President Biden’s premise that the economy is humming along just fine as the country heads into another presidential campaign season. Indeed, Secretary Yellen released a statement within minutes of Fitch’s announcement saying she “strongly” disagrees with the ratings change and that it is based on “arbitrary and outdated data.”

“Fitch’s decision does not change what Americans, investors, and people all around the world already know: that Treasury securities remain the world’s preeminent safe and liquid asset, and that the American economy is fundamentally strong,” Ms. Yellen said.