The White House is seen at dusk on September 30, 2023 in Washington, DC.

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Moody’s Investors Service on Friday cut its rating outlook for the U.S. government to negative from stable, citing rising risks to the country’s financial strength.

The rating agency has affirmed the US’s long-term issuer and senior unsecured ratings at Aaa.

“In the context of higher interest rates without effective fiscal policy measures to reduce government spending or increase revenue,” the agency said. “Moody’s expects U.S. budget deficits to remain very high, which will significantly weaken debt affordability.”

Moody’s said brinkmanship in Washington was also a contributing factor.

“Ongoing political polarization within the US Congress increases the risk that successive administrations will be unable to reach consensus on a budget plan to slow the decline in debt sustainability,” the ratings agency said.

As for maintaining the country’s ratings at Aaa, Moody’s said it expects the U.S. to “retain its exceptional economic strength.” “Further positive growth surprises over the medium term could at least slow the deterioration in debt sustainability,” the agency said.

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

Moody’s move to lower its outlook comes as Congress again faces the looming threat of a government shutdown. The government’s funding runs through Nov. 17, but lawmakers in Washington continue to argue over a bill that passed before the deadline.

Newly elected House Speaker Mike Johnson (R-La.) has indicated he will release a Republican government funding plan on Saturday, a move that would give members time to approve it before an expected vote on the measure on Tuesday to read.

But his plan to fund certain parts of the government until December 7 and other parts until January 19, known as the Laddered Continuing Resolution (CR), is dead on arrival at the White House and the Democratic-controlled Senate.

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

Back in August, Fitch lowered the default rating of long-term U.S. foreign exchange issuers to AA+ from AAA, citing an “expected deterioration in financial conditions over the next three years,” as well as erosion of governance and a growing debt burden.

Feuds in Washington were also an issue. “The repeated political disputes over the debt limit and the short-term decisions have undermined trust in the financial administration,” Fitch said at the time.

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