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    Home»Terror»Moody’s strips US government of top credit rating | Debt News
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    Moody’s strips US government of top credit rating | Debt News

    mediamillion1000@gmail.comBy [email protected]May 17, 2025No Comments3 Mins Read
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    Moody’s strips US government of top credit rating | Debt News
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    Moody’s cited rising debt, saying US had repeatedly failed to end the trend of large annual fiscal deficits and interest.

    Moody’s Ratings has stripped the United States government of its top credit rating, citing successive governments’ failure to stop a rising tide of debt, a surprise move that could complicate President Donald Trump’s efforts to cut taxes and send ripples through global markets.

    On Friday, Moody’s lowered the rating from a gold-standard Aaa to Aa1. “Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs,” it said as it changed its outlook on the US to “stable” from “negative”.

    But, it added, the US “retains exceptional credit strengths such as the size, resilience and dynamism of its economy and the role of the US dollar as global reserve currency.”

    Moody’s is the last of the three major rating agencies to lower the federal government’s credit rating. Standard & Poor’s downgraded federal debt in 2011, and Fitch Ratings followed in 2023.

    In a statement, Moody’s said, “We expect federal deficits to widen, reaching nearly 9 percent of [the US economy] by 2035, up from 6.4 percent in 2024, driven mainly by increased interest payments on debt, rising entitlement spending, and relatively low revenue generation.’’

    Extending President Donald Trump’s 2017 tax cuts, a priority of the Republican-controlled Congress, Moody’s said, would add $4 trillion over the next decade to the federal primary deficit, which does not include interest payments.

    White House communications director Steven Cheung reacted to the downgrade via a social media post, singling out Moody’s economist, Mark Zandi, for criticism. He called Zandi a political opponent of Trump.

    “Nobody takes his ‘analysis’ seriously. He has been proven wrong time and time again,” Cheung said.

    Stephen Moore, former senior economic adviser to Trump and an economist at Heritage Foundation, called the move “outrageous”.

    “If a US-backed government bond isn’t triple A-asset, then what is?” he told Reuters.

    The Department of the Treasury did not immediately respond to a request for comment from the Reuters news agency.

    Bond market rout concerns

    A gridlocked political system has been unable to tackle the huge deficits that the US has accumulated. Republicans reject tax increases, and Democrats are reluctant to cut spending.

    On Friday, House Republicans failed to push a big package of tax breaks and spending cuts through the Budget Committee. A small group of hard-right Republican lawmakers, insisting on steeper cuts to Medicaid and President Joe Biden’s green energy tax breaks, joined all Democrats in opposing it – a rare political setback for the Republican president.

    Since his return to the White House on January 20, Trump has said he would balance the budget while his Treasury Secretary, Scott Bessent, has repeatedly said the current administration aims to lower US government funding costs.

    Trump’s attempts to cut spending through Elon Musk’s Department of Government Efficiency have fallen far short of its initial goals. And attempts to raise revenue through tariffs have sparked concerns about a trade war and global slowdown, roiling markets.

    Left unchecked, such worries could trigger a bond market rout and hinder the administration’s ability to pursue its agenda.

    The downgrade, which came after market close, sent yields on Treasury bonds higher, and analysts said it could give investors a pause when markets re-open for regular trading on Monday.

    “Very surprising. This is big – markets were not expecting this at all,” said Tom di Galoma, managing director of rates and trading at Mischler Financial in Utah.

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