US economic warning after Moody’s downgraded Biden’s rating to “negative”

US economic warning after Moody’s downgraded Biden’s rating to “negative”

An expert issued a warning about the US economy, as Treasury bonds are “no longer safe” after Moody’s changed the outlook for the Biden government from “stable” to “negative.”

The rating agency downgraded the president’s government on Friday, saying the US fiscal deficit is expected to remain very large, meaning debt sustainability will weaken significantly.


Moody’s maintained the US credit rating at AAA, but warned of the possibility of downgrading it.

The agency, which provides risk assessment services to large companies and organizations, warned that “continued political polarization” in the US government poses a risk because Congress “will not be able to reach consensus on a fiscal plan to slow the decline in debt sustainability.”

Watch here: EJ Anthony offers his view on American economic growth

Issuing a warning to consumers about the situation, research fellow and public finance economist at the Heritage Foundation, EJ Anthony, said: “The explosion of household debt and rising interest rates has led to borrowing costs for households rising dramatically.”

“The American consumer is hitting a wall,” Anthony said.

“After accumulating more than $1 trillion in credit card debt and depleting trillions of dollars in savings, many families no longer have room in their budgets.

“They are pulling back on their spending to address the cost of living crisis.

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Moody's

Moody’s maintained the US credit rating at AAA, but warned of the possibility of downgrading it.

Reuters

Unbridled federal spending, including on pet projects such as “green” energy programs, has made multi-trillion-dollar deficits a structural problem for the United States and exacerbated inflation.

Prices have risen much faster than profits, so much so that the typical American household has lost nearly $5,400 in annual purchasing power under the Biden administration, leaving less money for discretionary spending.

Exploding household debt and rising interest rates have also dramatically increased household borrowing costs, by about $2,000 since Biden took office.

“Combined with the losses due to inflation, this is the equivalent of a family in January 2021 receiving an approximately $7,400 reduction in their annual income.”

This comes as another potential shutdown of the federal government looms in just one week so Republicans and Democrats can reach a breakthrough on funding.

Joe Biden

This comes as another potential shutdown of the federal government looms in just one week until Republicans and Democrats can reach a breakthrough on funding.

Reuters

If they fail to agree to stop the gap, the services provided by the government will end or be severely limited.

The Biden administration said it did not agree with Moody’s decision to lower its credit rating.

However, the decision came after two other major agencies (Fitch and Standard & Poor’s) also downgraded their ratings.

According to an October Treasury Department statement, interest on US debt totaled $89 billion, which Anthony equates to 40 percent of all income taxes collected.

“It’s no surprise they’re cutting back on spending — they have no other choice,” Anthony continued.

“Investors are waking up to the reality that the federal government will one day be unable to pay its bills, and that day will come sooner than previously thought.

“It can either skip bond payments or implicitly default by inflating its debt, which is what it did under Biden.

“Bondholders are getting dollars worth just 83 cents, compared to what they originally lent.

It is as if the Biden Treasury decided to pay only 83 percent of what it promised.

“The question is not why Moody’s lowered its outlook on US debt, but why Moody’s did not actually downgrade the debt itself.

“If the past three years have taught us anything, it is that US Treasuries are no longer ‘safe’.”

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