The outcome of the forthcoming U.S. Presidential election will not impact the United States’ Aaa stable credit rating, says New York-based credit rating agency Moody’s Investors Service in a report published on Wednesday.
The U.S. sovereign rating is resilient to a change in government, Moody’s says in a statement announcing the report, given its very high economic and institutional strength, strong debt affordability, and the role of the U.S. dollar as global reserve currency and U.S. Treasuries as global bond benchmark
That said, Moody’s also expects the U.S. federal deficit to “widen significantly” over the medium term, depending on the choices made on fiscal policy and entitlement spending by the next government.
“The cost of Social Security, Medicare, and Medicaid will rise materially in the coming years as the population ages,” says Sarah Carlson, senior vice president at Moody’s, in a statement. “In the absence of policy and legislative changes, this will put more pressure on the U.S.’ fiscal profile over the rest of this decade and into the 2020s.”
Neither candidate has provided much detail on how they intend to address these medium-term fiscal pressures, Moody’s notes. Whereas issues that have been a focus of the campaign, such as immigration and trade, will have less impact on the U.S. credit rating.
Additionally, Moody’s notes that both candidates have argued for increased infrastructure spending. “This would be positive for the U.S. if it were to be funded with new revenue sources, or through the reallocation of available resources,” says Moody’s. “Higher spending would support economic activity in industries still recovering from the great recession and have positive spillover effects on other industries.”