Moody’s Downgrades US Credit Rating Outlook to Negative

Moody’s Investors Service changed its outlook on the United States credit rating from stable to negative on Friday over large fiscal deficits and declining debt affordability.

The agency further warned of “political polarization” within the United States Congress as politicians struggle to pass any plan to fund the federal government through next year, let alone with the needed cuts.

“Recently, multiple events have illustrated the depth of political divisions in the U.S.: Renewed debt limit brinkmanship, the first ouster of a House Speaker in U.S. history, prolonged inability of Congress to select a new House Speaker, and increased threats of another partial government shutdown,” Moody’s said.

Although Moody’s is warning of the risks, it still kept the U.S.’s “AAA” rating. It’s the last of the three major U.S. government credit rating agencies to do so.

Fitch downgraded its U.S. credit rating from “AAA” to “AA+” in August, and S&P Global did the same in 2011.

The Biden administration reacted to the announcement in a mixed fashion.

Deputy Treasury Secretary Wally Adeyemo slammed the move, arguing that “The American economy remains strong, and Treasury securities are the world’s preeminent safe and liquid asset.”

White House press secretary Karine Jean-Pierre, however, blamed House Republicans for the credit rating drop, alluding to their struggles over Ukraine funding, spending cuts, and finding a House speaker.

Rep. Andy Harris of Maryland, a House Committee on Appropriations member, placed the blame on “out-of-control government spending and deficits.”

“We cannot, in good conscience, continue writing blank checks to our federal government knowing that our children and grandchildren will be responsible for the largest debt in American history,” Harris argued on X, formerly known as Twitter.

Information from Reuters was used in this report.