Moody’s predicted the weakening of the financial power of the United States

The fiscal sustainability of the United States of America will gradually deteriorate from 2019, and the Federal debt and the burden of servicing it will reach historically record levels, which will ultimately put pressure on the country’s sovereign credit rating, Moody’s Investors Service warned in a report on the United States.

At the same time, the outcome of the recent midterm elections, in which the Congress was divided between Democrats and Republicans, will not allow to correct the situation due to fierce political bargaining and the focus of legislators on other issues (foreign trade, health, immigration), Moody’s writes.

The first full fiscal year under the President Donald Trump (from October 2017 to September 2018), the US ended with the largest budget deficit in six years-779 billion dollars, or 3.9% of GDP. Budget revenues increased by less than 1% (due to the drop in corporate income tax revenues by almost a third), and expenditures increased by 3%-mainly due to the fact that interest expenses on debt increased by 20%.

“We expect a continued trend of relatively weak growth in government revenues, as well as an increase in debt service payments in conjunction with (large — scale) spending on health and social security programs… this trend will be exacerbated by slower global economic growth in 2019-2020 and continued tightening of financial conditions,” the report said.

If the us government does not make radical changes in fiscal policy, the Federal budget deficit will reach 8% of GDP by fiscal year 2028, compared with 4.8% of GDP in the current fiscal year, Moody’s predicts. Such values of the us budget deficit reached only during the global financial crisis of 2008-2009, when the authorities had to fill the economy with money (at the end of 2009, the deficit was equal to 9.8% of GDP).

Author: Flyn Braun
Graduated from Cambridge University. Previously, he worked in various diferent news media. Currently, it is a columnist of the us news section in the Free News editors.
Function: Editor