US Government Shutdown Exceeds Three Weeks; Another Rating Agency Downgrades US Credit Rating!

On the 24th, Scope Ratings downgraded the United States' long-term issuer and senior unsecured debt ratings in both local and foreign currency from "AA" to "AA-", three notches below the agency's highest rating. However, it simultaneously revised the outlook from "Negative" to "Stable."

The statement said, "The downgrade is driven by continued deterioration in public finances and weakened governance standards. The erosion of governance standards has reduced the predictability of U.S. policymaking, increased the risk of policy errors, and diminished Congress's ability to address the country's structural fiscal challenges."

On the 1st of this month, because U.S. Republicans and Democrats failed to reach an agreement on a new temporary funding bill before the end of the last fiscal year on September 30th, the U.S. government fell into a shutdown, which has now lasted for over three weeks.

Scope noted in its statement that persistently high federal deficits and increasing interest payments are key drivers of the growing public debt-to-GDP ratio. It is projected that the U.S. public debt-to-GDP ratio will reach 140% by 2030, a level significantly higher than that of most sovereign nations.

The rating agency also stated that the extension of previous tax cuts and the high share of mandatory spending limit budgetary flexibility in the short term. Furthermore, the consolidation of power within the executive branch, coupled with frequent legislative gridlock due to congressional polarization, undermines policy stability and increases the risk of errors.

Scope's action marks another blemish on the U.S. credit record. After Moody's downgrade in May, the U.S. lost the last top-tier rating from the three major rating agencies. At this time, the path of U.S. public finances under President Donald Trump is facing increasing scrutiny.