US Shutdown Could Have Negative Impact. Rating agency Moody’s on Monday (25/9/2023) said that the United States (US) government shutdown would harm the country’s credit rating. This was stated after one month earlier Fitch lowered the US rating due to the debt ceiling crisis.
Moody’s analyst William Foster said that a possible government shutdown could be further evidence of how political polarization in Washington could undermine fiscal policy making, as government debt affordability pressures rise due to rising interest rates.
Foster stated that this could lead to a negative view and potentially reduce the ranking someday, namely when the pressure is not overcome.
Moody’s in its statement stated that fiscal policy in the US is less strong compared to other countries with a AAA rating. A rollback of fiscal policy would also be further evidence of weakness.
President Joe Biden’s top economic adviser, Lael Brainard, said Moody’s comments highlighted the risks posed by the congressional maneuver.
A Treasury spokesperson also said that Moody’s report provided further evidence that the shutdown could weaken the momentum of the US economy, which is at a time when inflation is below 4 percent.
Moody’s also said that the economic impact of the government shutdown would likely be limited and short-lived, with the most immediate impact coming from lower government spending. The negative impact is also greater if the shutdown lasts longer.
Foster also revealed that this will look increasingly difficult, due to things like shutdowns and debt limits due to the highly polarized political dynamics in Washington.