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Government shutdown should not affect U.S. credit rating, Moody's says

October 07, 2013|By Shan Li
  • A protester holds up a sign outside the U.S. Capitol. Credit rating firm Moody's said that the government shutdown and debt ceiling crisis would not affect the country's credit rating.
A protester holds up a sign outside the U.S. Capitol. Credit rating firm… (Jewel Samad / AFP/Getty…)

Despite doomsday predictions, neither the government shutdown nor the upcoming debt ceiling debate will negatively affect U.S. creditworthiness, according to Moody's Investors Service.

The credit rating company, which predicted last month that Congress would avoid a shutdown, said Monday that the United States would continue to pay off its debts no matter what happens with the budget impasse.

"The shutdown has no effect on the government's ability to pay interest and principal on its debt obligations," the report said, "and therefore does not directly affect the government's creditworthiness."

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Moody's has said such short-term disruptions will not lead to a downgrade of the nation's AAA credit rating. Even a delay in raising the $16.7-trillion debt ceiling will not affect the country's rating, it said.

That is in contrast to the debt ceiling crisis in 2011, when credit rating firm Standard & Poor's downgraded the country's AAA rating down to AA+ for the first time in history. Moody's and Fitch, another leading credit rating firm, did not downgrade the United States at that time. But the two put the country's rating on a negative outlook, a sign that a downgrade may come in three to five years.

The government shutdown entered its second week on Monday with no signs of an end. Democrats say they will talk about the long-term budget when the debt ceiling is raised and the government is reopened. Republicans want spending restraints and a delay on the rollout of the federal healthcare law.

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Follow Shan Li on Twitter @ShanLi

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