Moody’s Says US Economic Conditions Will Worsen Because Because Politicians Cannot Stop Spending And Expanding Deficits

The following report is by Bloomberg:

The administration’s tax and spending policies will affect the size of future budget deficits and the expected decline in US fiscal strength, which could have a significant effect on the US sovereign credit profile. These debt dynamics would be increasingly unsustainable and inconsistent with a AAA rating if no policy actions are taken to course correct.

Analysts led by Claire Li and William Foster wrote in the report.

Last November, Moody’s lowered the US sovereign outlook to negative from stable while affirming the nation’s rating at Aaa, the highest investment-grade notch.

SEE: Moody’s Drops US AAA Credit Rating To ‘Negative,’ Treasury Disagrees

Moody’s is the only one of the three main credit companies with a top rating on the US after Fitch Ratings downgraded the US government in August 2023 after another debt-ceiling battle in Congress. S&P Global Ratings stripped the US of its top score in 2011 amid that year’s debt-limit crisis.

Moody’s is waiting to see how the new Congress and White House work on shoring up the US fiscal position next year, before making a decision on the sovereign rating outlook, Foster told Bloomberg in a phone interview.

SEE: US Credit Rating Downgraded As Treasury Calls For Another ‘Eye-Popping’ $1 Trillion In Lending, As Economy Continues To Collapse

“Over the long term, if fiscal policy does not respond to widening deficits, that would put increasing pressure on the triple A rating,” said Foster. “Fiscal policy is front and center here,” and “that’s why it’s important to focus on fiscal policy response now.”

Negotiations next year in Washington about extending or allowing the 2017 Tax cuts and Jobs Act to expire will be closely watched by Moody’s, said Foster. “We look at that as a potential lever to improve the fiscal outlook with regard to revenues in particular and will be closely watching that.”

Moody’s forecasts that the TCJA will be extended given likely political resistance to an expiration in most post-election government scenarios.

After the races for Congress and the White House in November conclude, Moody’s anticipates –

The US government will remain divided, preventing sweeping fiscal reforms by the new administration. As a result, fiscal policy proposals by both candidates will likely require intense bipartisan negotiations and compromise.

Moody’s has a baseline estimate of 4% for the 10-year yield and Foster said, “if rates remain at current levels or below that, that would be positive and create a bit more space for the cost of debt.

Read the rest of the report here.

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AUTHOR COMMENTARY

And yet hardly anyone cares that debts and deficits are skyrocketing, and those that do know, particularly among a growing number of younger people, understand the ramifications of this because they will be the ones left to pay for it.

The spending in 2025 WILL only vastly increase at even far more alarming levels than they have. Next year, you can expect inflation and debts to hit levels beyond comprehension.

Ezekiel 22:12 In thee have they taken gifts to shed blood; thou hast taken usury and increase, and thou hast greedily gained of thy neighbours by extortion, and hast forgotten me, saith the Lord GOD.

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[7] Who goeth a warfare any time at his own charges? who planteth a vineyard, and eateth not of the fruit thereof? or who feedeth a flock, and eateth not of the milk of the flock? [8] Say I these things as a man? or saith not the law the same also? [9] For it is written in the law of Moses, Thou shalt not muzzle the mouth of the ox that treadeth out the corn. Doth God take care for oxen? [10] Or saith he it altogether for our sakes? For our sakes, no doubt, this is written: that he that ploweth should plow in hope; and that he that thresheth in hope should be partaker of his hope. (1 Corinthians 9:7-10).

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