Moody's Strips Top Rating from U.S., White House Slams Decision
United States Loses Top Credit Ranking by Moody's
Moody's Investors Service dropped the U.S.'s top credit rating, downgrading it from "Aaa" to "Aa1." The White House didn't mince words, firing back at the agency with criticism.
The reason for the downgrade? Moody's expects the U.S.'s financial health to worsen compared to its past and other highly-rated countries, with financial might no longer being enough to counter declining fiscal metrics.
Apparently, past U.S. administrations and Congress have missed the mark in addressing chronic budget deficits and soaring interest expenses. The federal debt-to-GDP ratio is projected to reach an alarming 134% by 2035, up from 98% in 2024. The rating agency doesn’t foresee the proposed budget plans having much impact on long-term spending cuts.
Steve Cheung, the White House's director of communications, didn't hold back, taking aim at Moody's economist Mark Zandi. On social media, Cheung labeled Zandi a political opponent of President Trump, claiming that his analyses lack credibility due to multiple past inaccuracies.
Previously, Moody's was the last major U.S. rating agency to retain a "Triple-A Rating" for the U.S. In 2011, Standard & Poor's lowered the country, and Fitch followed suit in 2023. Moody's warned signs in November 2023, altering the outlook from "stable" to "negative," suggesting a downgrade might be imminent. Lower ratings can push up borrowing costs for nations.
However, Moody's acknowledges that temporary GDP growth might slow due to imposed tariffs by President Trump. Despite this, they believe the U.S. economic growth will remain substantially unscathed in the long haul. They also commend the U.S.'s extensive economy, resilience, and dynamism, as well as the U.S. dollar's role as the global reserve currency.
Regardless of some political turmoil, the agency expects the U.S. Federal Reserve to maintain a strong and effective monetary policy under its leadership.
- Reason for Downgrade
- Rising government debt and interest payments
- Large fiscal deficits
- Increased entitlement spending and low revenue generation
- White House Response
- Blaming past administrations for increased national debt through COVID stimulus bills
- Focus on eliminating waste and fraud in government spending
- Emphasizing proposed legislation to address fiscal issues, such as "The One, Big, Beautiful Bill"
Sources: ntv.de, mau/rts
- Rating Agencies
- Moody's
- United States
- Fiscal Policy
- Deficit
- Donald Trump
- The downgrade in the U.S.'s credit rating by Moody's Investors Service is due to their expectations of a worsening financial health compared to the past and other highly-rated countries, with concerns over rising government debt, large fiscal deficits, and increased entitlement spending.
- In response to the downgrade, the White House criticized Moody's and pointed fingers at past administrations for increased national debt, particularly through COVID stimulus bills. The White House also emphasized their proposed legislation, such as "The One, Big, Beautiful Bill," to address fiscal issues and limit waste and fraud in government spending.
