Moody's: without substantial debt reduction, US will lose its only Aaa rating

Moody's warned in a report that the next US administration ‘will have to deal with widening fiscal deficits’; nearly a year ago, Moody's announced a negative outlook on the US sovereign credit rating. ‘The administration's tax and spending policies will affect the size of future budget deficits, as well as the expected decline in U.S. fiscal strength, which could have a significant impact on the U.S. sovereign credit profile,’ analysts including Claire Li and William Foster wrote in the report. After the congressional and White House races are over in November, it is expected that the US government will continue to be divided, thus preventing the new administration from carrying out comprehensive fiscal reforms. As a result, both candidates' fiscal policy programmes are likely to require intense bipartisan negotiations and compromises. The report concludes that ‘without policy action to correct them, these debt-related dynamics will become increasingly unsustainable and inconsistent with the Aaa rating’.