Moody’s Investors Service said Monday that a potential federal government shutdown would be “credit negative” for the U.S. sovereign credit profile.
Moody’s Investors Service said Monday that a federal government shutdown would be “credit negative” for the U.S.
Moody’s said that while any shutdown would likely be temporary and concentrated in government-heavy areas like Washington, D.C., and have limited ramifications for the broader U.S. economy and growth, it would “underscore the weakness of U.S. institutional and governance strength relative to other Aaa-rated sovereigns.”
A shutdown would especially demonstrate how Washington’s political polarization is constraining policy-making when fiscal deficits are widening and debt affordability is deteriorating, Moody’s said. During the last government shutdown, which lasted a record 35 days and ended in January 2019, about 800,000 federal employees were furloughed or worked without pay, and private contracting companies suspended investment and hiring decisions, the report said. Lower-wage workers of private contractors, including food service workers and security guards, face a permanent loss of income during shutdowns.
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