(TheRedAlertNews.com) – With the specter of another government shutdown haunting the nation after the grim prospect was only temporarily put off in September, America’s credit rating outlook has been changed to “negative” by one of the major investment watchdogs.
Yesterday, the US government was set to see a government shutdown unless a budget or a continuing resolution were passed by Congress and signed by Joe Biden.
The shutdown threat was previously postponed on September 30 with the passing of a continuing resolution that ended up costing then-House Speaker Kevin McCarthy (R-CA) his job.
The Hill reported that Moody’s Investor Service, one of the three most prominent financial analysis and credit rating agencies, adjusted the United States’ rating outlook from stable to negative.
This change occurred as Congress was approaching yet another critical deadline to fund the federal government and avoid a shutdown next week.
While the US retains its “AAA” rating, the highest level of creditworthiness, Moody’s highlighted growing concerns regarding the country’s fiscal strength. This worry stems from increasing interest rates and escalating debt costs.
“In the context of higher interest rates, without effective fiscal policy measures to reduce government spending or increase revenues, Moody’s expects that the US’ fiscal deficits will remain very large, significantly weakening debt affordability,” the agency stated.
“Continued political polarization within US Congress raises the risk that successive governments will not be able to reach consensus on a fiscal plan to slow the decline in debt affordability,” it elaborated.
Moody’s noted the lack of consensus in Congress on government debt could further impair the nation’s fiscal health.
Currently, Moody’s stands as the only major ratings agency maintaining the US at the top-tier AAA rating.
In contrast, Fitch Ratings downgraded the US from “AAA” to “AA+” in August, influenced by the deadlock between President Biden and House Republicans over the debt ceiling.
S&P Global had previously downgraded the US to “AA+” in 2011 following a similar debt ceiling conflict.
The report observes that Moody’s downgrade is a significant indicator of the need for effective fiscal management and political cooperation to maintain the nation’s financial stability.