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Moody's Urges Washington to Manage Entitlement Spending

  • VOA News

FILE - Ohio Gov. John Kasich talks about the national debt at Mohawk Valley Community College in Utica, N.Y., in his bid for the 2016 Republican presidential nomination, April 15, 2016.

Moody's Investors Service said Tuesday that U.S. decisions on taxing and spending would have a larger than usual impact on the nation's credit profile in the near future.

The analysis said President Donald Trump's plans to cut taxes and spend more on infrastructure might increase the deficit. The combination of deficits over years is what makes up the national debt. Moody's says federal debt is equal to about 77 percent of gross domestic product, which is the sum of all goods and services a nation produces.

In a report published Tuesday, Moody's said unresolved problems with the cost of Social Security and other entitlement spending could push debt upward significantly and leave officials with less room to maneuver than in the past.

Rating agencies examine the financial health of companies and countries that issue bonds, so that lenders can assess the risk that they will not be repaid. Another rating agency, Standard and Poor's, cut the U.S. credit rating in 2011 when political bickering pushed the nation to the brink of default.

Moody's said the high level of debt comes at a time when interest rates are expected to rise, which will boost interest costs and make it more difficult for the government to cope with the next financial downturn. The report said Trump inherited 2 percent annual economic growth, a "healthy" economy and a "modest" budget deficit from his predecessor, Barack Obama.

In the November election, slow wage growth was one of the voters' major concerns. A blog post from the Federal Reserve Bank of Atlanta said U.S. wages grew at a 3.5 percent annual rate last year, about double the rate during the worst of the financial crisis a few years ago.

A Fed expert said wages would probably grow at a slightly higher pace this year, but would grow faster if companies and officials could find a way to boost worker productivity, which has been lagging.

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