Budget plan doesn’t alter Moody’s view on U.S. rating, Hess says

A U.S. budget accord on track to win passage in Congress doesn’t change the view of Moody’s Investors Service on America’s top Aaa rating because it leaves medium-term deficits largely unaltered, according to Senior Vice President Steven Hess.

“The change in deficits that are projected for the next several years is really minimal,” New York-based Hess, the lead sovereign analyst for the U.S., said in a phone interview. “This more or less confirms the deficit and debt trajectory that we had expected and which we think is compatible with the Aaa rating.”

Moody’s has a stable outlook on the U.S.’s credit grade.

The budget accord reached by congressional negotiators would reduce direct spending by $78 billion and raise revenue by about $7 billion from 2014 through 2023, amounting to about $85 billion of deficit reduction in the next decade, the Congressional Budget Office said yesterday in a statement.

Republican Representative Paul Ryan and Democratic Senator Patty Murray agreed on the deal to ease $63 billion in automatic spending cuts of $40 billion in 2014 and about $20 billion in 2015. The plan would set U.S. spending at about $1.01 trillion for this fiscal year, higher than the $967 billion required in a 2011 budget plan. It cushions the military from a $19 billion cut set for next month.

The ratio of public debt to gross domestic product is forecast to fall to 74.6% in 2015 after peaking next year at 76.2%, according to a CBO forecast in May.

The U.S.’s AAA credit grade was placed on rating watch negative on Oct. 15 by Fitch Ratings, which cited the government’s failure to raise its borrowing limit as the Treasury’s deadline neared. Standard & Poor’s downgraded the U.S. by one step to AA+ on Aug. 5, 2011, on Washington gridlock and the lack of an agreement to contain its growing ratio of debt to gross domestic product. S&P has a stable outlook on America’s credit grade.

www.bloomberg.com

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