The United States government’s credit outlook was downgraded by Moody’s Investors Service on Friday from stable to negative due to growing threats to the country’s fiscal stability.

The U.S.’s senior unsecured and long-term issuer ratings have been confirmed by the ratings agency at Aaa.

“In the context of higher interest rates, without effective fiscal policy measures to reduce government spending or increase revenues,” the agency said. “Moody’s expects that the US’ fiscal deficits will remain very large, significantly weakening debt affordability.”

According to Moody’s, Washington’s brinkmanship has also played a role.

“Continued political polarization within US Congress raises the risk that successive governments will not be able to reach consensus on a fiscal plan to slow the decline in debt affordability,” the ratings agency said.

Regarding maintaining the country’s Aaa ratings, Moody’s stated that it anticipates the United States of America to “maintain its exceptional economic strength.” In the medium run, the agency stated, “further positive growth surprises could at least slow the deterioration in debt affordability.”

“While the statement by Moody’s maintains the United States’ Aaa rating, we disagree with the shift to a negative outlook,” said Deputy Secretary of the Treasury Wally Adeyemo in a statement. “The American economy remains strong, and Treasury securities are the world’s preeminent safe and liquid asset.”

The decision by Moody’s to lower its outlook comes as Congress is about to confront the possibility of another government shutdown. Although the government is currently funded till November 17th, legislators in Washington are still unable to agree on a measure in time for the deadline.

In an effort to give members time to review the Republican government financing plan before the anticipated Tuesday vote on the bill, newly elected House Speaker Mike Johnson (R-La.) has stated that he will make it public on Saturday.

However, his proposal, known as a laddered continuing resolution, or CR, to finance some aspects of the government through December 7 and other sections through January 19, is unworkable in both the Democratic-controlled Senate and the White House.

“Moody’s decision to change the U.S. outlook is yet another consequence of Congressional Republican extremism and dysfunction,” White House press secretary Karine Jean-Pierre said in a statement.

Due to “expected fiscal deterioration over the next three years,” deteriorating governance, and an increasing debt load, Fitch downgraded the U.S. long-term foreign currency issuer default rating from AAA to AA+ back in August.

Another problem in Washington was feuding. Fitch stated at the time that “confidence in fiscal management has been eroded by the repeated debt-limit political standoffs and last-minute resolutions.”

(Adapted from CNBC.com)

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