News India Live, Digital Desk: Us economy: Moody’s Ratings has reduced the United States of America (US) long -term issues and senior unsecured ratings from AAA to AA1. This decline has come amid concerns over an increase in federal debt and interest payment, which has increased considerably in the last decade.
The rating agency stated that the move continuously reflects the constant failure in the US administration and the Congress to reversed the trend of large and consistent fiscal deficit trends.
Moody’s said: “Constant US administration and Congress have failed to agree on measures to reverse the big annual fiscal deficit and rising interest cost.
It mentioned that the US federal government is spending more, while revenue has declined due to tax deduction. This combination has increased deficit and debt levels. Moody’s said it hopes that the US will continue the big fiscal deficit in the next decade, especially when the eligibility expenditure increases and the revenue growth remains stable. If the 2017 Tax Cut and Employment Act is extended, as Moody’s estimates, it may add an estimated $ 4 trillion US dollars to the federal primary deficit (except interest payment) over the next ten years.
By 2035, compulsory expenditure – including interest – is estimated to be about 78 percent of the total federal expenditure, which is more than 73 percent in 2024. However, despite the downgrade, Moody’s set a stable approach citing balanced risks at the AA1 level. This accepted many credit forces that support the American economy, such as its large size, flexibility, strong track of high average income and innovation.
The agency also pointed to the role of the US dollar as the world’s major reserved currency, which gives the government a strong financing ability despite its high deficit. Moody’s believes that the US will maintain its institutional forces, including the separation of constitutional powers and an effective, independent monetary policy led by the Federal Reserve.
Moving forward, Moody’s stated that the refund of fiscal discipline through revenue increase or reduction in expenditure could improve ratings. On the other hand, a rating may lead to another decline in ratings due to faster decline in debt metric or sudden confidence in US dollar. However, the agency considers such a scenario impossible, as there is currently no reliable option of US dollar as a global reserved currency.
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