Credit rating agency Moody's downgrades U.S.'s credit rating from AAA, indicating concerns over the country's inability to control rising debt levels.
Rewritten Article:
The credit rating agency, Moody's, stripped the US government of its top Aaa rating on Friday, attributing the move to years of mounting debt and lack of effective debt control measures by successive governments.
In a statement, Moody's explained, "We anticipate federal deficits to balloon, reaching approximately 9% of the economy by 2035, up from 6.4% in 2024, predominantly due to increased interest payments on debt, escalating entitlement spending, and low revenue generation."
The White House took a stern stance towards Moody's in response, with communications director Steven Cheung publicly criticizing Moody's economist, Mark Zandi, on social media.
Moody's becomes the last of the three major rating agencies to lower the federal government's credit following Standard & Poor's 2011 downgrade and Fitch Ratings' 2023 downgrade.
The extended tax cuts, a priority for the Republican-controlled Congress, will allegedly add an estimated US$4 trillion to the federal primary deficit over the next decade, according to Moody's. This figure is based on the assumption that these tax cuts will remain in effect.
This downgrade comes as a result of several factors: persistent government debt, continued fiscal deficits, increasing interest costs, escalating entitlement spending, and lower than expected revenue generation. Moreover, Moody's cited an atmosphere of heightened policy uncertainty as a consequence of shifting trade priorities.
Collectively, these factors prompted Moody's to lower the U.S. credit rating for the first time, making it the first occasion all three major credit rating agencies have done so.
[1] Enrichment data: This downgrade follows prolonged escalation of government debt, significant increases in interest payment ratios compared to similarly rated sovereigns, and a lack of agreement on measures addressing large annual fiscal deficits and growing interest costs [2]. The factors also include heightened entitlement spending, low revenue generation, and policy uncertainty stemming from evolving trade priorities.
- The downgrade of the US credit rating by Moody's is a result of prolonged escalation of government debt, significant increases in interest payment ratios compared to similarly rated sovereigns, lack of agreement on measures addressing large annual fiscal deficits and growing interest costs, heightened entitlement spending, low revenue generation, and policy uncertainty stemming from evolving trade priorities.
- The continued fiscal deficits, increasing interest costs, escalating entitlement spending, and low revenue generation faced by the US government have been cited by Moody's as reasons for stripping it of its top Aaa rating.
- The downgrade of the US federal government's credit by Moody's is attributed to factors such as persistent government debt, the extended tax cuts that will allegedly add an estimated US$4 trillion to the federal primary deficit over the next decade, and a heightened atmosphere of policy uncertainty due to shifting trade priorities.
