 No more Triple A rating !
On Friday, Moody’s said successive U.S. administrations and Congress have failed to agree on measures to reverse a trend of large annual fiscal deficits and growing interest costs, adding that it doesn’t believe that current fiscal proposals under consideration will result in significant multiyear reductions in mandatory spending and deficits.
Moody’s said mandatory spending, including interest expense, is projected to rise to around 78% of total U.S. spending by 2035, from around 73% in 2024. If the 2017 Tax Cuts and Jobs Act is extended, which is the firm’s base-case scenario, it would add around $4 trillion to the federal fiscal primary deficit, which excludes interest payments, over the next decade, Moody’s said.
The downgrade comes on the same day the House Budget Committee failed to advance a sweeping tax and spending bill that is the centerpiece of President Donald Trump’s legislative agenda, underscoring deep divisions within the Republican caucus.
“Over the next decade, we expect larger deficits as entitlement spending rises while government revenue remains broadly flat. In turn, persistent, large fiscal deficits will drive the government’s debt and interest burden higher,” Moody’s said. It expects U.S. fiscal performance to deteriorate “relative to its own past and compared with other highly rated sovereigns.”
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