Moody's downgrades U.S. outlook to 'negative'

Moody's Investor Service on Friday downgraded its outlook for the U.S. to "negative" from "stable" while maintaining the nation's AAA credit rating.

"In the context of higher interest rates, without effective fiscal policy measures to reduce government spending or increase revenues, Moody's expects that the US' fiscal deficits will remain very large, significantly weakening debt affordability," the service announced. "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."

Moody's asserted that the nation's "exceptional economic strength" and potential for positive growth could at least slow the mounting cost of maintaining its debt. It further insisted the maintained prominence of the dollar in global markets would mitigate risks.

"While the adjustment of the US economy and financial sector to higher-for-longer interest rates is underway, policymakers have facilitated the transition through transparent and effective policy," the service added. "Finally, the unique and central roles of the US dollar and Treasury bond market in the global financial system provide extraordinary funding capacity and significantly reduce the risk of a sudden spiraling of funding costs, which is particularly relevant in the context of high debt levels and weakening debt affordability."

While Moody's declined to downgrade the U.S. credit rating, other firms have already done so. Fitch Ratings, in August, assigned the U.S. a "stable" outlook rating, but dropped the nation's credit from AAA to AA+. S&P Global made the same downgrade in 2011.

The Biden administration rejected the Moody's downgrade, with Treasury officials insisting the U.S. economy is thriving.

"While the statement by Moody's maintains the United States' AAA rating, we disagree with the shift to a negative outlook. The American economy remains strong, and Treasury securities are the world's preeminent safe and liquid asset," Deputy Treasury Secretary Wally Adeyemo said, according to Reuters.

Ben Whedon is an editor and reporter for Just the News. Follow him on X, formerly Twitter.