Moody's: President Trump Inherits Modest Deficit And Healthy Economy, But Challenges Loom

From today:
London, 24 January 2017 -- The US' (Aaa stable) credit profile will be most significantly influenced by the new administration's choices regarding medium-term fiscal policy, says Moody's Investors Service in its latest report on the US Government's credit profile. As President Trump's policies start to take shape, any actions to address the rising burden of entitlement spending will be particularly relevant.

While President Trump inherits a modest deficit, his administration faces fiscal challenges that will increasingly weigh on the US' credit strength by the end of the decade. Robust revenue growth during the last eight years helped shrink the fiscal deficit from around 9.8% of GDP to around 3.2% in 2016. However, in the absence of policy changes, rising expenditures on entitlement programs will lead to wider deficits again. Rising debt levels and rising interest rates will erode the US' capacity to absorb shocks. US debt levels in 2016 were already the highest for any Aaa-rated country, with federal debt at around 77% of GDP.