A lower debt rating increases the risk of higher borrowing costs for the federal government.
The warning comes as the government teeters on the brink of another shutdown next week and follows a move by the Fitch ratings service just a few months ago to downgrade US debt. Standard & Poor’s made a similar move more than a decade ago after an 11th-hour showdown over raising the debt ceiling.
Deputy Treasury Secretary Wally Adeyemo blasted the move, saying the administration has “demonstrated its commitment to fiscal sustainability, including through the more than $1 trillion in deficit reduction included in the June debt ceiling deal as well as President Biden’s budget proposal that would reduce the deficit by nearly $2.5 trillion over the next decade.”
The White House pinned the blame on the GOP.
“Moody’s decision to change the US outlook is another consequence of congressional Republican extremism and dysfunction,” press secretary Karine Jean-Pierre said in a statement.
Rep. Andy Harris, a Republican from Maryland and a member of the House Appropriations Committee, blamed “out of control government spending and deficits.”
Harris tweeted: “We cannot in good conscience continue to write blank checks to our federal government knowing that our children and grandchildren will be responsible for the largest debt in American history.”
For now, the US maintains its “Aaa” rating, the highest possible credit rating for a borrower under the Moody’s scale. The rating firm noted surprisingly strong economic growth in the US, which could slow the rise in its debt costs.
“US institutional and governmental strength is also very high, supported in particular by the effectiveness of monetary and macroeconomic policies,” it said.