U.S. Credit Rating Lowered by Moody's
Swap that Scale:
Moody's is drop-kicking our 21-rung rating scale down a notch due to over a decade of ballooning government debt and spiraling interest payments — that's the lowdown.
The finance gurus forecast a swelling budget deficit in the United States in the coming years, fueled by a hike in welfare spending and a static revenue ceiling. By the year 2035, per Moody's, the deficit will creep close to 9% of GDP, compared to 6.4% in 2024.
While Moody's trumpeted a shift from negative to stable in their prediction, they didn't mince words: "The Stateside economy remains a champ, thanks to its size, resilience, and economic dynamism, plus the almighty US currency's role as a global reserve coin," they emphasized, and expressed faith that "America's institutions and governance won't turn mushy, even when they're tested."
In previous years, credit evaluators Fitch and S&P had already re-evaluated the reliability of the U.S. economy. Fitch made their move in 2023, dragging the Stateside economy for the first time in almost 30 years, while S&P did so in 2011. Thus, Moody's call left the USA without the last top credit rating, according to Bloomberg.
The White House swiftly branded the decision political. White House press secretary Stephen Chung pointed to one of the economists at Moody's Analytics, Mark Zandi, as possibly having a bone to pick with the administration. Mark Zandi did not reply to Bloomberg's request for comment.
"A downgrade could mean that investors will ask for higher returns on Treasury bonds," Tracy Chen of Brandywine Global Investment Management explained to Bloomberg.
Curious about more news? Hang with us on our Telegram channel, @expert_mag!
- #USA
- #CreditRating
Key Insights:
- Using Bullet Points:
- Rising Government Debt: U.S. government debt has experienced significant growth over more than a decade, causing higher interest payment ratios compared to similarly rated countries.
- Increased Interest Payments: Growing interest payments on debt is a substantial concern, as it impacts the government's ability to manage its fiscal obligations.
- Rising Entitlement Spending: Mandatory spending, particularly on entitlement programs, has increased significantly without substantial reforms to cut costs.
- Low Revenue Generation: The U.S. struggles to generate revenue in proportion to its spending levels, aggravating the fiscal imbalance.
- Policy Uncertainty: Heightened political uncertainty affects investor confidence and the government's ability to address fiscal challenges.
- Integrating Insights into the Text (~12%): "The rise in government debt over more than a decade has led to higher interest payment ratios compared to similarly rated countries," and "Furthermore, mandatory spending, particularly on entitlement programs, has continued to expand without significant reforms to reduce costs."
The issue of rising government debt in the United States, due to over a decade of ballooning debt and escalating interest payments, has become a topic of discussion in the general-news and politics arena. This is forcing businesses to reconsider investment strategies, such as seeking higher returns on Treasury bonds. Moreover, the increase in entitlement spending and the struggle to generately revenue in proportion to spending levels, compound the fiscal imbalance and add to the concerns in the finance sector.
