2023-09-25 18:33:17
(Washington) The absence of an agreement on the US federal budget for 2024 between Republicans and Democrats might have “a negative effect on the sovereign debt” of the country, the rating agency Moody’s warned on Monday.
According to the agency, if there is no risk of default in the threat of fiscal paralysis that seems to be looming, it “would highlight the weakness of governance and institutions in the United States compared to other AAA-rated countries “.
“A paralysis of public services would demonstrate the significant constraints that growing political polarization continues to impose on the country’s budgetary policy, in a period of persistent public deficit and deterioration of debt capacity,” detailed the agency. in a note.
According to Moody’s, American fiscal institutions present two major weaknesses compared to what exists in other AAA-rated countries: “administrations do not adopt a medium-term fiscal strategy and existing fiscal rules have little operational relevance but simply reinforce the already existing political discord.
However, a paralysis of services, particularly if it is short-term, “will have limited consequences on the American economy and national growth”, although the impact will, necessarily, be greater for companies working with services governments, such as defense contractors, and certain geographic areas, particularly the capital region, Washington.
In mid-September, a Biden administration official warned that such a paralysis would cause damage to the American economy, due to the freezing of spending and the delays in payments that this would imply on the part of public services.
The rating agency’s opinion reinforces the pressure on Republicans and Democrats to reach an agreement while Moody’s is the last agency to have maintained the maximum AAA rating for the United States, following the downgrade announced by its competitor Fitch last August.
S&P was the first to deprive the United States of AAA in 2011, and has not since raised the rating, remaining at AA+.
The 2024 budget must be adopted by Congress before 1is october. But without an agreement between Democrats and Republicans, the federal administration will have to stop certain payments.
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