Moody's downgrades outlook on U.S. credit rating to 'negative'
Ratings agency Moody's on Friday lowered its outlook on the U.S. credit rating to "negative" from "stable" citing large fiscal deficits and a decline in debt affordability.
"In the context of higher interest rates, without effective fiscal policy measures to reduce government spending or increase revenues, Moody's expects that the U.S.'s fiscal deficits will remain very large, significantly weakening debt affordability," the agency said in a statement.
Moody's retained its top triple-A credit rating on U.S. government debt, though it is the last of the three major credit rating agencies to do so. Fitch Ratings lowered its rating to AA+ from AAA in August, and Standard & Poor's downgraded the U.S. in 2011.
White House spokesperson Karine Jean-Pierre placed the blame on Republicans, saying the downgrade was "yet another consequence of congressional Republican extremism and dysfunction."
Moody's cited congressional dysfunction as one reason it lowered its outlook on U.S. debt as congressional lawmakers left Washington for the weekend without a plan to avoid a potential government shutdown that could occur by November 17.
"Recently, multiple events have illustrated the depth of political divisions in the U.S.: Renewed debt limit brinkmanship, the first ouster of a House Speaker in U.S. history, prolonged inability of Congress to select a new House Speaker, and increased threats of another partial government shutdown," the agency said.
Moody's move drew criticism from U.S. Deputy Treasury Secretary Wally Adeyemo. "While the statement by Moody's maintains the United States' AAA rating, we disagree with the shift to a negative outlook," he said.
"The American economy remains strong, and Treasury securities are the world's preeminent safe and liquid asset," Adeyemo said.
The federal government's budget deficit jumped to $1.7 trillion in the budget year that ended September 30, up from $1.38 trillion the previous year.
(With input from agencies)
(Cover: Dark clouds hang above the U.S. Capitol dome in Washington, D.C., U.S., September 25, 2023. /CFP)