Moody’s upgrades U.S. debt outlook

WASHINGTON — Moody’s Investors Service upgraded the outlook for U.S. government debt to “stable” from “negative” and affirmed the United States’ blue chip Aaa rating.

The rating agency cited a surprising drop in the federal deficit — the difference between what the government collects in taxes and what it spends. The U.S. government is on track to report its lowest annual deficit in five years.

Through the first eight months of the budget year, the deficit has totaled $509.8 billion, according to the Treasury Department. That’s nearly $400 billion lower than the same period last year.

The Congressional Budget Office forecasts the annual deficit will be $670 billion when the budget year ends on Sept. 30. That would be well below last year’s deficit of $1.09 trillion and the lowest since President Barack Obama took office. It would still be the fifth-largest deficit in U.S. history.

The deficit hit a peak 10.1 percent of gross domestic product — the broadest measure of the U.S. economy — in the depths of the Great Recession in 2009. CBO expects the deficit to fall to 3.4 percent of GDP in 2014 and 2.1 percent in 2015.

Moody’s had lowered the outlook to “negative” two years ago. But it never went as far as rival Standard &Poor’s, which stripped the U.S. of its top credit rating in 2011.

S&P last month upgraded its outlook for long-term U.S. government debt but kept its rating at AA+, a notch below its top grade.

A stronger credit outlook and rating should allow governments to borrow at lower interest rates by signaling that their bonds are less risky. Weaker credit ratings should force them to pay higher rates.

But investors largely ignored S&P’s downgrade in 2011. Stocks fell briefly and then rebounded. Yields on Treasurys later fell to record lows.

An improving economy and tax hikes and spending cuts that took effect this year have narrowed the government’s budget gap.

Still, Moody’s warned that the government needed to control longer-term deficits as Baby Boomers age and begin to collect Social Security and Medicare. Failure to do so “could put the rating under pressure again.”

More in Local News

Treatment center in north Everett could open in 2020

The 32-bed facility on 10th Street would serve people with addiction and mental illness.

NOPEYEP, YEPNOPE: We love our personalized license plates

Street Smarts asked you to send in vanity plate finds, and readers did not disappoint.

Bill Short, 74, and his sister Pat Veale, 73, attended the old Emander School, which was near what’s now I-5 and 128th Street in south Everett. (Dan Bates / The Herald)
Woman wants to commemorate a neighborhood long gone

Pat Veale and her siblings grew up in the Emander area of south Everett.

Somers sees Paine Field as focal point of a thriving county

In an annual speech, he also acknowledged challenges such as opioid addiction, crime and homelessness.

Man revived from opioid overdose at county jail

He was taken to Providence Regional Medical Center then returned to the jail a few hours later.

Man arrested after robbery reported at Lynnwood Walgreens

He matched the description of a suspect in an earlier robbery reported about three miles away.

Bomb threat clears lobby at the Snohomish County Jail

Officers shut down Oakes Avenue between Wall Street and Pacific Avenue in downtown Everett.

Slide prompts closure of Whitehorse trail east of Arlington

More than two miles of the route will be closed indefinitely “due to significant earth movement.”

Police seek man after stabbing and robbery south of Everett

A convenience store clerk was slashed by a knife-wielding man at 8 a.m. Thursday morning.

Most Read