A U.S. government shutdown would negatively impact the country’s credit, credit rating agency Moody’s said on Monday, a stark warning that came a month after Fitch downgraded the U.S. rating by one notch over a cap crisis. debt.
U.S. government services would be disrupted and hundreds of thousands of federal workers would be furloughed without pay if Congress does not provide funding for the fiscal year that begins Oct. 1.
A possible shutdown would be further evidence of how political polarization in Washington is weakening fiscal policymaking at a time of growing pressures on the affordability of government debt due to higher interest rates, the Moody’s analyst told Reuters. William Foster.
“If there is no effective fiscal policy response to try to offset those pressures… then the likelihood of that having an increasingly negative impact on the credit profile is going to be there,” Foster said. “And that could lead to a negative outlook, potentially a downgrade at some point, if those pressures are not addressed.”
US government services would be disrupted and hundreds of thousands of federal workers would be furloughed without pay if Congress does not provide funding for the fiscal year that begins October 1.REUTERS
Moody’s gives the US government an “Aaa” rating with a stable outlook – the highest credit rating it assigns to borrowers. It is the last major agency with such a rating after Fitch downgraded the government’s triple-A rating by one notch in August to AA+, the same rating assigned by S&P Global in 2011.
“Fiscal policymaking is less strong in the United States than in many Aaa-rated countries, and another shutdown would be further evidence of this weakness,” Moody’s said in a statement.
The economic impact of a shutdown would likely be limited and short-lived, with the most direct economic impact caused by lower public spending. Of course, the longer the shutdown lasts, the more negative its impact would be on the broader economy, Moody’s said.
“Fiscal policymaking is less strong in the United States than in many Aaa-rated countries, and another shutdown would be further evidence of this weakness,” Moody’s said in a statement.REUTERS
Congress has so far failed to pass any spending bills to fund federal agency programs in the fiscal year that begins Oct. 1 amid a dispute within the Republican Party.
The shutdown would not affect public debt payments, but would come just months after brinkmanship over the U.S. debt limit threatened to trigger a sovereign debt default.
That crisis, although ultimately resolved before any missed debt payments, was a major factor that led Fitch to downgrade its U.S. rating by one notch last month.
Congress has so far failed to pass any spending bills to fund federal agency programs amid a dispute within the Republican Party. Above, the Speaker of the House of Representatives, Kevin McCarthy.AP
“In this environment of higher rates for longer and increasing pressures on the debt affordability front, it is much more important that fiscal policy can respond,” said Moody’s Foster.
“And it seems increasingly challenged because of things like the government shutdown and coming out of the debt limit episode, because it’s a very polarized political dynamic in Washington,” he said.
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Source: vtt.edu.vn