(Washington) The absence of an agreement on the US federal budget for 2024 between Republicans and Democrats could have “a negative effect on the sovereign debt” of the country, the rating agency Moody’s warned on Monday.
According to the agency, while there is no risk of default in the threat of fiscal paralysis that appears 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, US fiscal institutions have 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.
Nonetheless, a service shutdown, particularly if it is short-lived, “will have limited consequences for the U.S. economy and national growth,” although the impact will, necessarily, be greater for businesses 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, after the downgrade announced by its competitor Fitch last August.
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The 2024 budget must be passed by Congress by October 1. But without an agreement between Democrats and Republicans, the federal administration will have to stop certain payments.
