Moody’s Investors Service Lowers U.S. Outlook Rating to Negative amid Polarization, Deficits

Moody’s Investors Service lowered the United States outlook from stable to negative on Friday, citing polarization and deficit spending.

“Moody’s Investors Service on Friday lowered its ratings outlook on the United States’ government to negative from stable, pointing to rising risks to the nation’s fiscal strength,” CNBC noted. “The ratings agency has affirmed the long-term issuer and senior unsecured ratings of the U.S. at Aaa.”

The agency said that it expects the “US’ fiscal deficits will remain very large, significantly weakening debt affordability.”

The agency added that political polarization raises concern that future governments will not be able to properly implement a coherent fiscal policy.

“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 said.

The U.S. rating will stay at Aaa as long as the nation continues to “retain its exceptional economic strength.”

“Further positive growth surprises over the medium term could at least slow the deterioration in debt affordability,” the agency said.

Deputy Secretary of the Treasury Wally Adeyemo said that the Biden administration disagrees with the rating shift to a negative.

“While the statement by Moody’s maintains the United States’ Aaa rating, we disagree with the shift to a negative outlook,” Adeyemo said in a statement. “The American economy remains strong, and Treasury securities are the world’s preeminent safe and liquid asset.”

The negative rating comes as the U.S. government faces another possible shutdown.

“Newly minted Speaker Mike Johnson is running smack dab into the same spending problems that plagued his predecessor, raising the prospects of a government shutdown if Congress doesn’t act between now and next Friday and further exposing divisions within the conference,” CNN reported this week.

“House Republican leaders were forced to abruptly pull two-year-long spending bills from the floor this week amid opposition from both ends of their badly divided GOP conference,” it added. “And Johnson is still grappling with a strategy to keep the government’s lights on without sparking a right-wing rebellion.”

Paul Roland Bois directed the award-winning feature film, EXEMPLUM, which can be viewed for FREE on YouTube or Tubi. A high-quality, ad-free stream can also be purchased on Google Play or Vimeo on Demand. Follow him on Twitter @prolandfilms or Instagram @prolandfilms.