Moody’s downgrades U.S. credit rating due to increasing debt.

Key Points: Moody’s Downgrades US Credit Rating Amid Rising Debt Concerns

1. Downgrade Details

   • Moody’s lowered the US sovereign credit rating from Aaa to Aa1, citing unsustainable fiscal deficits and rising debt burden (now at $36 trillion).

   • The agency warned that US debt could reach 134% of GDP by 2035, up from 98% in 2024.

   • This marks the first Moody’s downgrade since 1919, following similar moves by Fitch (2023) and S&P (2011).

2. Political & Economic Fallout

   • Trump administration criticized the move, with former adviser Stephen Moore calling it “outrageous.”

   • Democrats blamed Republican tax cuts, with Senate Leader Chuck Schumer urging fiscal responsibility.

   • Markets reacted negatively, with Treasury yields rising, signaling higher borrowing costs.

3. Failed Fiscal Measures

   • Trump’s tax cut extension push stalled in Congress amid GOP infighting over spending cuts.

   • Tariff hikes (meant to boost revenue) risk trade wars and economic slowdown, unsettling investors.

   • Elon Musk’s “Department of Government Efficiency” failed to deliver promised spending reductions.

4. Market & Investor Concerns

   • Hedge funds and analysts warn of higher borrowing costs for both government and private sector.

   • Bond yields could spike further, worsening market fragility amid tariff-induced economic uncertainty.

Moody’s downgrade highlights the US’s worsening debt crisis, fueled by political gridlock and unfunded tax cuts. While the White House dismissed the move, markets remain jittery, with long-term risks including higher interest rates and slower growth. Unless Congress enacts credible deficit-reduction plans, the US risks further downgrades and economic instability. The episode underscores the urgent need for bipartisan fiscal reform—but with elections looming, decisive action appears unlikely.