Moody’s Warns of Declining US Fiscal Strength

Moody’s Warns of Declining US Fiscal Strength

iStockphoto/The Fiscal Times

Trump’s tax cuts combined with a slowing economy will diminish the United States’ “fiscal strength” over the next 10 years, Moody’s Investor Service said Wednesday.

The gradual decline could pressure the U.S. credit rating at some point, the bond-rating agency added, although the “exceptional economic strength and the unique roles of the dollar and Treasury bond market in the global financial system” should serve as a cushion amid the decline.

"Our projections continue to point to a slow but persistent deterioration in the US' fiscal strength over the next 10 years, as the federal debt burden grows and debt affordability declines," Moody's Vice President and Senior Credit Officer William Foster said in a statement. "This adverse fiscal dynamic will be driven by widening federal budget deficits due to significant expenditure growth, led by interest payments and age-related entitlement spending, and below-average revenue intake."

Yahoo Finance’s Rick Newman said the warning from Moody’s “challenges a core promise of President Trump and his fellow Republicans, who insisted the $1.5 trillion tax cut they passed last year would pay for itself and even generate more tax revenue, not less, because economic growth would suddenly boom.”