U.S. government finances are going to "deteriorate" in the years ahead, Moody's Investors Service said Friday, which will eventually put the country's triple-A rating at risk.
The credit rating agency noted in an in-depth report on the government's fiscal situation that its balance sheet will "continue to weaken over the coming decade and become a source of downward pressure on the credit profile."
Moody's specifically cited the tax cut signed into law by President Trump in January, which is estimated to add around $1 trillion to deficits over the next decade.
Trump also a budget bill Friday meant to allow Congress to add an additional $320 billion in spending and tax breaks to deficits over the next two years. If the higher levels of spending remain in place, the deal would send the federal debt held by the public up from around 75 percent of the economy today to well over 100 percent in 2027, the Committee for a Responsible Federal Budget estimated.
Moody's noted that the U.S. may have an exceptional ability to carry a major debt load without risking its credit, including a large and dynamic economy, relatively favorable demographics, and the dollar's status as the world's reserve currency.
Those advantages could be undercut, Moody's said, by policies along the lines of ones sought by Trump. The report stated that if the U.S. "shifts its policy stance with respect to international trade and immigration towards greater protectionism, this may swing the balance of risks for long-term growth to the downside."