William Foster, Moody’s Vice President, explained that the current fully polarized political climate in the United States is likely to hinder rapid decision-making on financial issues, posing risks to the country’s economy. He pointed out that the political response aimed at dealing with the deteriorating balance of power in the budget may not be achieved until 2025, given that the presidential elections will be held in the United States next year.
According to the credit rating agency’s forecasts, the recent wave of bond sales – which has sent yield levels to levels not seen since 2007 – will be accompanied by higher interest payments and thus a larger budget deficit. Foster stressed that in order to mitigate these challenges, effective fiscal policy measures are needed, either by increasing revenues or by reducing primary expenditures. Reuters.
Moody’s expressed concern about “continued political polarization” in Congress, which increases the risk that lawmakers will struggle to reach consensus on a budget plan that would reduce debt and improve existing debt service. Republicans in Congress are expected to approve a temporary spending measure to avoid a partial government shutdown, with House Speaker Mike Johnson saying the Biden administration’s “reckless spending program” has contributed to an unsustainable $33.6 trillion debt mountain.
