A US government shutdown would negatively impact the country’s credit, credit rating agency Moody’s said on Monday, a stern warning coming one month after Fitch downgraded the US by one notch on the back of a debt ceiling crisis.
US government services could be disrupted and tons of of hundreds of federal staff furloughed without pay if Congress fails to offer funding for the fiscal yr starting Oct. 1.
A possible shutdown could be further evidence of how political polarization in Washington is weakening fiscal policymaking at a time of rising pressures on government debt affordability because of upper rates of interest, Moody’s analyst William Foster told Reuters.
“If there isn’t an efficient fiscal policy response to attempt to offset those pressures … then the likelihood of that having an increasingly negative impact on the credit profile can be there,” said Foster. “And that may lead to a negative outlook, potentially a downgrade sooner or later, if those pressures aren’t addressed.”
![US Capitol building](https://nypost.com/wp-content/uploads/sites/2/2023/09/NYPICHPDPICT000044357061.jpg?w=1024)
Moody’s has an “Aaa” rating for the US government with a stable outlook – the very best creditworthiness it assigns to borrowers. It’s the last major agency with such a rating after Fitch downgraded the federal government triple A rating by one notch in August to AA+ — the identical rating assigned by S&P Global in 2011.
“Fiscal policymaking is less robust within the US than in lots of Aaa-rated peers, and one other shutdown could be further evidence of this weakness,” Moody’s said in a press release.
The economic impact of a shutdown would likely be limited and short-lived, with essentially the most direct economic impact attributable to lower government spending. After all, the longer the shutdown lasts, the more negative its impact could be on the broader economy, said Moody’s.
![Moody's sign](https://nypost.com/wp-content/uploads/sites/2/2023/09/NYPICHPDPICT000044357060-1.jpg?w=1024)
Congress to this point has did not pass any spending bills to fund federal agency programs within the fiscal yr starting on Oct. 1 amid a Republican Party feud.
The shutdown wouldn’t impact government debt payments nevertheless it would come just a number of months after political brinkmanship across the US debt limit threatened to cause a sovereign debt default.
That crisis, though it was eventually resolved before any missed debt payment, was a significant factor leading Fitch to downgrade its US rating by one notch last month.
![House Speaker Kevin McCarthy](https://nypost.com/wp-content/uploads/sites/2/2023/09/NYPICHPDPICT000043860765-1.jpg?w=1024)
“On this environment of upper rates for longer and pressures constructing on the debt affordability front, it’s that way more necessary that fiscal policy can respond,” said Foster at Moody’s.
“And it looks increasingly challenged due to things like the federal government shutdown and having come off the debt limit episode, since it’s such a polarized political dynamic in Washington,” he said.