MercoPress. South Atlantic News Agency

Moody’s lowers US credit rating; US budget deficit plus 6% of GDP

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

Moody’s Ratings decision last week to lower the US credit rating to Aa1 from Aaa, (the highest investment-grade position) triggered strong reactions and criticisms from President Donald Trump and his political advisor.

Steven Cheung, a spokesman for President Donald Trump, singled out Mark Zandi, an economist for Moody’s Analytics, in a post on X, accusing him of being a long-time critic of the administration’s policies.

“Nobody takes his ‘analysis’ seriously. He has been proven wrong time and time again,” Cheung said. The US was downgraded by Moody’s on Friday in a landmark move that casts doubt on the US as the world’s highest-quality sovereign borrower.

“While we recognise the US’ significant economic and financial strengths, we believe these no longer fully counterbalance the decline in fiscal metrics,” Moody’s said in a statement Friday.

In explaining the decision, the credit tating agency pointed out that for more than a decade, “US federal debt has risen sharply due to continuous fiscal deficits” and cited pressure from higher interest rates.

“This one-notch downgrade on our 21-notch rating scale reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns,” Moody’s added in the statement.

While it’s unclear if the downgrade will lead to policy changes in Washington, the move comes with the federal budget deficit running near US$ 2 trillion a year — or more than 6% of gross domestic product. Higher interest rates over the past several years have also pushed up the cost to service the government’s debt. 

At the same time, lawmakers are working on a massive tax package that would renew cuts passed in 2017 during Trump’s first term and provide additional reductions he promised during the last election. The Moody’s decision was announced just hours after a key House committee failed to advance the tax package over the concerns of hardline conservatives worried about the bill’s cost.

The tax bill is likely to add to deficits in the coming years but is a top priority for the president. The bill includes roughly US$1.5 trillion in spending cuts over the next decade but that would not cover the roughly US$4 trillion in tax cuts outlined in the plan.

Trump criticized lawmakers as “grandstanders,” urging his party to quickly move on the tax bill and the White House warned Republicans that the administration expects all of them to back the package.