Moody's said that America's fiscal strength has been declining for many years and “deteriorated further” after the sovereign credit rating outlook was downgraded to negative at the end of 2023. “Higher interest rates have clearly weakened debt affordability and accelerated the decline in fiscal strength,” analysts led by Moody's analyst William Foster wrote in a report released on Tuesday. Moody's said debt affordability is “the most important factor in our assessment of America's fiscal strength,” which depends on interest expenses as a share of government revenue and GDP. US Treasury yields continued to rise sharply from extremely low levels in 2020, leading to a decline in debt affordability. Moody's predicts that as the ratio of interest expenses to government revenue rises from 9% in 2021 to about 30% in 2035, the rate at which US fiscal strength deteriorates further. “At this level, fiscal flexibility will be drastically reduced,” the report reads.

Moody's said that America's fiscal strength has been declining for many years and “deteriorated further” after the sovereign credit rating outlook was downgraded to negative at the end of 2023. “Higher interest rates have clearly weakened debt affordability and accelerated the decline in fiscal strength,” analysts led by Moody's analyst William Foster wrote in a report released on Tuesday. Moody's said debt affordability is “the most important factor in our assessment of America's fiscal strength,” which depends on interest expenses as a share of government revenue and GDP. US Treasury yields continued to rise sharply from extremely low levels in 2020, leading to a decline in debt affordability. Moody's predicts that as the ratio of interest expenses to government revenue rises from 9% in 2021 to about 30% in 2035, the rate at which US fiscal strength deteriorates further. “At this level, fiscal flexibility will be drastically reduced,” the report reads.