Credit rater: U.S. still ‘AAA’ nation

The United States is well positioned to maintain its top-shelf credit rating for at least a few years, according to Moody’s Investors Service.

The credit rater announced Wednesday that it was keeping a stable outlook on the nation’s “AAA” credit rating, the highest possible score. The rater said the U.S. enjoys “numerous credit strengths,” and cited the shrinking budget deficits in recent years as a positive sign.

{mosads}But the credit rater warned of looming fiscal problems over the horizon, as the costs of some government programs are expected to climb and push the U.S. towards unsustainable debt levels. Specifically, Moody’s said the nation’s rating could come under pressure towards the end of the decade if policymakers fail to take steps to rein in the growing costs of those programs.

“Adjustments to major social programs such as Social Security and healthcare spending may eventually become necessary to avoid pressure on US creditworthiness,” says Steven Hess, a Moody’s senior vice president.

Moody’s refused to weigh in on whether Congress should rely on higher taxes or slashed spending to solve the fiscal problems, saying the choice makes “little difference to credit quality.”

The rater also warned that the historically high debt levels the U.S. is shouldering could give the nation less flexibility to respond to another major financial shock. The U.S.’s debt level doubled in the wake of the financial crisis, jumping from 35.1 percent of GDP in 2007 to 72 percent of GDP in 2013, as the government pumped billions of dollars into the economy to try and support it.

Moody’s reaffirmation of the nation’s stable credit standing comes as all three major raters see little threat of another U.S. downgrade anytime soon.

Both Fitch Ratings and Standard & Poor’s have also said they believe the outlook for U.S. debt is stable, although S&P made history back in 2011 when it issued the first-ever downgrade to the nation’s credit rating, following a protracted battle over raising the debt limit.

— This story was updated at 2:43 p.m.