November 13 – The Investor Service Moody’s has dropped the rating on the United States government from stable to negative last week.
The announcement cited rising interest rates and political polarization.
Meanwhile, Congress is looking to avoid another government shutdown.
Attorney Clint Barkdoll said, “This is a big deal in as much that this is always the precursor that these ratings agencies use to outright downgrade the credit. Now we know Fitch a few months ago they made a similar move when it came to the US’s credit rating. But Moody’s if you look at their report, they’re citing all the things we’re always talking about, just this ballooning federal spending, the ballooning federal deficit and the debt and the apparent inability of Washington, Congress and the president to get anything done on these issues.”
This Friday is when the government is scheduled to shut down again.
Barkdoll said, “There’s reporting over the weekend that new Speaker Johnson may just do a clean continuing resolution, which is what sunk Kevin McCarthy a few months ago. They might just kind of kick this again for a few more months. So this is a big problem. If the credit does in fact get downgraded, the government itself is looking at even higher interest rates on all of this money it has to keep floating and borrowing when it issues bonds and other Treasury instruments. So it’s a real problem.”
Michele Jansen of NewsTalk 103.7FM asked, “Doesn’t this just give the House and the new speaker the perfect opportunity to say see, this is why we don’t want to do new spending without things being paid for, including what they wanted to do for Israel? Are we just not paying attention to this? Do we just not care that the US could get downgraded with all this excess spending?”
Barkdoll said, “I would think this very much becomes part of the discussion in Congress this week, that if they can’t figure this out by Friday, and that will include some cuts in spending, they’re going to get an outright downgrade from Moody’s. Kevin McCarthy, he did an interview on CNN, and he very much left the door open that he’s just leaving Congress. He is so frustrated with the inability to get anything done in Washington, and you seem to be seeing more and more of that from political figures on both sides of the aisle. This will be a real test this week for Speaker Johnson and Congress in general. Will they be able to pull things together enough to keep the government open after Friday?”
