US Government Warning: Shutdown Could Leave Negative Impact on Credit Rating

Republican infighting in the House is leading the US to a possible government shutdown, and credit rating agency Moody's says this would be very bad for the US credit rating.

This looming shutdown would disrupt US government services and affect hundreds of thousands of federal workers as they would not be paid if Congress continues bickering about the budget for the fiscal year starting October 1.

Moody's analyst William Foster told Reuters that a "possible shutdown would be further evidence of how political polarization in Washington is weakening fiscal policymaking at a time of rising pressures on US government debt affordability because of higher interest rates."

"If there is not an effective fiscal policy response to try to offset those pressures ... then the likelihood of that having an increasingly negative impact on the credit profile will be there," added the credit expert. "And that could lead to a negative outlook, potentially a downgrade at some point if those pressures aren't addressed."

Currently, Moody's is giving the US government a "AAA" rating with a stable outlook. This is the highest creditworthiness it assigns to borrowers. However, another agency, Fitch, downgraded the government by one notch in August to AA+. S&P Global also previously downgraded the US government back in 2011.

"Today's statement from Moody's underscores that a Republican shutdown would be reckless, create completely unnecessary risks for our economy, and lead to disruptions for communities and families across the country," said the director of the National Economic Council, Lael Brainard. "Congress must do its job and keep the government open."

The Republican Party Feud That May Lead to a US Government Shutdown

As for the reason why the US government might shut down, it is mainly because of Republican infighting, with the more moderate Republicans aligning with US House Republican Leader Kevin McCarthy of California butting heads with the more far-right and pro-Donald Trump MAGA Republicans led by Rep. Matt Gaetz of Florida.

As VOX pointed out, the US Congress does not have any time to pass bills to keep the government open anymore as the September 30 deadline approaches fast. Should the Republican-led Congress pass the bill, it would still have to be approved by the Democrat-led Senate and then Joe Biden.

So far, McCarthy has proposed a short-term bill that would keep the government open for 30 days and establish funding levels at $1.471 trillion a year/ However, this does not include things that the White House asked for, such as disaster aid to Ukraine. The compromise is also dead on arrival at the Senate.

Talks are continuing between the two feuding Republican factions as Speaker Kevin McCarthy tries to persuade the far-right MAGA Republicans to agree to a temporary funding measure to prevent closures. This includes a plan to pass multiple funding bills once the House returns Tuesday.

What Will Be Affected by the US Government Shutdown?

Should Republicans continue bickering, police officers, military personnel, and other federal workers would be furloughed. This could also spell bad news for the US economy, as well as deny citizens valuable services.

The far-right conservatives want massive spending cuts and do not want to compromise, with Gaetz publicly rebuking McCarthy. For now, the House Republicans are trying to pass a package of four bills to fund Defense, Homeland Security, State and Foreign Operations, and Agricultural departments before the deadline.

This article is owned by Latin Post.

Written by: Rick Martin

WATCH: US government on brink of shutdown: Here's what's at stake - TODAY