Moody’s lowers the US credit rating outlook to “negative”, and the Biden administration blames Republicans

Moody’s lowered its outlook on the US government from “stable” to “negative,” citing risks to the country’s financial strength and political polarization in Congress. the The agency maintained its current AAA top-tier rating for the United StatesBut he raised the possibility of reducing it in the future.
Moody’s said the US deficit is likely to remain very large, with interest rates rising and government spending increasing, especially on social programs and infrastructure.
Reasons for downgrading Moody’s rating
High interest rates: One of the main reasons cited by Moody’s for downgrading the rating is the sharp rise in debt servicing costs. The United States is experiencing an increase in interest rates, which directly affects the cost of servicing the national debt.
Political Polarization: Moody’s also cited increasing political polarization in the United States as a factor in its decision. This polarization is seen as a risk to the country’s ability to effectively manage its fiscal policy and address long-term debt challenges.
Huge Fiscal Deficit: The United States was running a huge fiscal deficit, which contributed to low debt sustainability. This situation has raised concerns about the sustainability of the country’s financial path.
Debt Sustainability Concerns: The combination of high interest rates and large fiscal deficits has reduced US debt sustainability. This decline is a major concern for credit rating agencies such as Moody’s.
The downgrade comes at a time when the United States faces a potential government shutdown, as the Republican-led House of Representatives, the Democratic-led Senate, and the Biden White House fail to agree on a funding bill before the November 18, 2023 deadline. The United States also has a looming debt ceiling crisis, with the Treasury Department warning that it will run out of money to pay its bills by December 3, 2023, unless Congress raises the borrowing limit.
the The Biden administration refused to lower Moody’s credit ratingSaying he doesn’t agree with switching to A Negative outlook The American economy remains strong and resilient. The administration blamed the GOP for the credit rating downgrade, calling it the result of the “extremism and dysfunction” of the GOP and accused them of holding the economy hostage by refusing to cooperate on financing and debt ceiling issues.
Immediately after Moody’s release, White House press secretary Karine Jean-Pierre said the change was “yet another result of Republican extremism and dysfunction in Congress.”
“While Moody’s statement maintains the US’s AAA rating, we disagree with the shift to a negative outlook. The US economy remains strong, and Treasury securities are the world’s preeminent safe and liquid assets,” Deputy Treasury Secretary Wally Adeyemo said in a statement.
The administration also defended its economic agenda, saying it would boost growth, productivity, and competitiveness of the American economy, and that its costs would be covered by higher taxes on the wealthy and corporations. The administration has urged Congress to pass the $1.75 trillion climate and social spending bill, known as the Build Back Better Act, and the bipartisan $1.2 trillion infrastructure bill, saying they are essential to the US’s recovery and future.
Moody’s downgrade could exacerbate financial concerns, but investors said they were skeptical it would have a material impact on the US bond market, which is seen as a safe haven because of its depth and liquidity.
However, Quincy Crosby, chief global strategist at the Bank of England, said, “It is a reminder that the clock is ticking and markets are getting closer and closer to understanding that we could be entering another period of drama that could ultimately lead to a government shutdown.” LPL Finance.
Moody’s downgrading of the credit rating raised concerns and questions about the financial health and political stability of the United States, as well as its role and reputation in the world. The credit rating downgrade also increased pressure and urgency on the US government to resolve the budget and debt impasse and implement its economic policies. The downgrade also highlighted challenges and opportunities for the United States to address its long-term structural issues, such as aging populations, income inequality, climate change, and global competition.
(With inputs from agencies)

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