Ratings firm Moody's recently downgraded its assessment of the U.S. credit outlook from "stable" to "negative," indicating America's worsening fiscal standing and the implications of political dysfunction.
Despite the downgrade, Moody's maintained the U.S.'s highest rating of AAA but warned that the rating could potentially slip.
This development comes against the backdrop of a highly polarized political environment.
Earlier this year, the U.S. faced the risk of defaulting on its debt. The ongoing failure to pass a budget has also increased the possibility of a government shutdown next week.
Moody's assessment reflects its lack of confidence in the U.S.'s ability to address political issues, which pose a threat to the country's ability to meet its debt obligations.
In August, Fitch, another ratings firm, lowered the U.S. credit rating from AAA to AA+. S&P Global Ratings downgraded the U.S. credit rating in 2011 during a previous debt limit fight.
These downgrades reflect a decreased confidence in the government's ability to repay its debts, based largely on political dysfunction.
In addressing the Moody's report on Nov. 11, U.S. House Speaker Mike Johnson (R-La.) Johnson said that House Republicans are committed to working in a bipartisan fashion for fiscal restraint, beginning with the introduction of a debt commission. (The AP 11/11/23) House GOP look to pass 2-step package to avoid partial shutdown | wwltv.com
After Fitch's downgrade, the stock market experienced immediate losses in the Nasdaq Composite and Dow Jones Industrial Average. However, experts suggest the Moody's downgrade may not be as significant.
But there are concerns that downgrades may lead to increased interest rates on mortgages and credit cards.
If the U.S. were to default, it could have catastrophic consequences for the economy. (Press Run Down 11/12/23) Why Moody's 'Negative' U.S. Credit Outlook Matters (pressrundown.com)
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