Economic inequality isn’t just an academic idea, as the recent wave of populist voting has made clear. But a new report suggests that worsening inequality in the U.S. could have financial repercussions for the country.

That report, out in early October from the credit-ratings agency Moody’s Investors Service, is called “Government of the United States: Rising income inequality will likely weigh on credit profile.” It may go without saying that when a ratings agency suggests something may “weigh on” a borrower’s credit profile, it’s a warning that a debt downgrade is what’s at risk.

As a reminder, the bonds issued by the United States federal government are considered the safest in the world. Global investors believe the U.S. government to have such an unimpeachable commitment to the country’s “full faith and credit,” its citizens and economy to be so rich and productive, and its institutions and processes so resilient that its bonds are the benchmark for financial markets around the world.

Because of this strong profile, U.S. government bonds TMUBMUSD10Y, +0.34% have been assigned the highest possible rating by the three major agencies, until 2011, when Congressional brinkmanship over raising the debt ceiling prompted Standard & Poor’s to cut the U.S. rating one notch, to AA+.

While S&P’s concern – that if the debt ceiling were not raised, some bondholders might not be paid – was immediate, the agency also flagged the longer-term, more structural issue of the government’s inability to rein in a growing deficit. The deficit is also at the heart of the Moody’s report.

In short, the Moody’s analysts wrote, the deficit is likely to surge as inequality increases the need for more social spending to support lower-income households — even as tax cuts that benefit the wealthy reduce revenue.

“Meanwhile, fiscal consolidation efforts that attempt to reduce the burden of entitlement spending, by hiking payroll taxes or cutting benefits, would ultimately exacerbate inequality,” they added. As for inequality, Moody’s thinks it’s already a problem, so deepening it would be serious.

Inequality has worsened since the financial crisis, which hit poorer households harder, in large part because they were more likely to have their wealth tied up in their homes, which lost value, and in many cases made them upside down on more-leveraged mortgages, keeping them stuck in place rather than mobile. Meanwhile, since the crisis, upper-income Americans, who have more of their wealth in stocks and bonds, have reaped hefty gains in financial markets.

But that’s just the recent manifestation of a long-term trend. Over the past two decades, the top 10% of income earners have enjoyed a nearly 200% increase in their overall median net worth, while the bottom 40% of earners have seen a decline, Moody’s notes.

It’s being driven by globalization of trade and labor which sends jobs overseas, technological automation which displaces laborers in “routine” jobs, higher education costs, more regressive tax laws which benefit higher-income households, and more.

As grim as that all sounds, Moody’s believes it’s going to get worse. The Tax Cuts and Jobs Act of 2017, passed entirely by Republicans in both chambers, “disproportionately benefits households with high incomes and very high levels of wealth,” the analysts wrote.

Meanwhile, the burden of student debt is likely to keep growing, “holding back the pace of net wealth accumulation by young households,” even as more public funds need to be spent to support an aging population.

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