Ratings agency Moody's said the U.S.'s fiscal health is at higher risk given the election of Republican Donald Trump as the next president and the expected composition of Congress.
U.S. budget deficits and government debt levels are expected to rise significantly under either candidate in the Nov. 5 election, according to multiple estimates, but Democrat Kamala Harris has a higher lead than President Trump. The increase in debt is expected to be small.
Trump's victory led to a slide in national debt earlier this week, as key elements of his economic plan, including tax cuts and tariffs, are expected to lead to faster growth, higher inflation and wider budget deficits.
As of Friday, it appeared increasingly likely that President Trump's Republicans would gain control of both chambers of Congress, which could allow new policies to be implemented more quickly.
“Without policy action to contain the budget deficit, the deterioration of the federal government's fiscal strength will continue to weigh on U.S. sovereign credit conditions,” Moody's said in a November 7 report.
“The risks to U.S. fiscal strength are heightened, given President Trump's fiscal policy promises during his campaign and the high likelihood of passage due to changes in the composition of Congress.”
Moody's is the last of the three major rating agencies to maintain the highest rating for the U.S. government.
The firm lowered its outlook on the U.S. triple-A credit rating from “stable” to “negative” last November, but it typically “resolves” its outlook. In other words, if the outlook is negative, we either restore it to stable or downgrade it. A downgrade is expected within 18 to 24 months.
“With Republicans in control of Congress and the executive branch, policy changes could be implemented quickly,” the agency said.
This raises the risk of “potential sudden and sweeping changes in tax, trade, immigration and climate policy, which could particularly impact manufacturing, technology and retail,” the report said. said.
