Reference News Network reported on May 18 that Agence France-Presse reported on May 16 that Moody's Ratings announced on May 16 that it had downgraded the sovereign credit rating of the United States from Aaa to Aa1, citing the continuous increase in government debt levels. This dealt a blow to US President Trump's claim of economic prosperity and strength in America. As a result, the US lost its last 3A highest rating from major rating agencies.
Moody's noted: "Over more than ten years, the ratio of US government debt and interest payments has continued to rise, clearly higher than other sovereign countries with equivalent ratings." It warned that by 2035, the ratio of federal deficit to GDP is expected to expand from 6.4% last year to nearly 9%.
Moody's predicted that by 2035, US federal debt will reach around 134% of GDP, compared to 98% last year.
According to a report by Reuters on May 16, due to concerns about the sustainability of the US debt, which has reached $36 trillion and continues to grow, Moody's downgraded the US sovereign credit rating on Friday, an unexpected move that may complicate President Trump's tax cut efforts and trigger a chain reaction in global markets.
Moody's was previously the last agency among the three major rating agencies to maintain the US 3A highest rating, but now it has downgraded it one level to "Aa1". Due to the expansion of the US fiscal deficit and increased interest payments, Moody's changed its outlook on the US in 2023.
Moody's changed the US rating outlook from "negative" to "stable" on Friday and said: "All US administrations and Congresses have failed to reach consensus on measures to reverse the trend of increasing annual fiscal deficits and interest costs."
However, Stephen Moore, former senior economic advisor to Trump and economist at the Heritage Foundation, called this move "shocking".
He told our reporter: "If bonds supported by the US government are not 3A assets, then what are they?"
White House Communications Director Chris Kang responded to the downgrade via social media, specifically criticizing economist Mark Zandi of Moody's. He said that Zandi was a political opponent of President Trump.
Kang said: "No one takes his 'analysis' seriously. He has been proven wrong time and again."
However, so far, the US government's efforts to increase revenue and reduce spending have failed to convince investors. Trump's attempts to cut spending through Elon Musk's Department of Government Efficiency have fallen far short of their initial goals. Efforts to increase revenue through tariffs have raised concerns about trade wars and a slowdown in the global economy, disrupting markets.
If left unchecked, such concerns could trigger a crash in the bond market, hindering the government's ability to implement its work plans.
Moody's downgraded the US rating after the market closed on Friday, causing US Treasury yields to rise. Analysts said this might make investors pause when the market reopens for regular trading next Monday.
Tom DiGaolo, general manager of the Interest Rate and Trading Department at Miller Tabak + Co., said: "This is very surprising. It's big news – the market did not see this coming at all."
Trump is urging the Republican-controlled Congress to pass a bill extending the tax cuts of 2017, his signature legislative achievement during his first term. Nonpartisan analysts say this move will increase the federal government's debt by several trillion dollars.
Senate Democratic Leader Chuck Schumer released a statement on Friday saying: "The downgrade of the US credit rating by Moody's should serve as a wake-up call to Trump and the Congressional Republicans."
Previously, Fitch Ratings, one of Moody's competitors, downgraded the US rating by one level in August 2023, citing expected fiscal deterioration and repeated debt limit negotiations, which threaten the government's ability to pay its bills.
Fitch was the second major rating agency to strip the US of its 3A highest rating. Standard & Poor's Ratings Services had already done so after the 2011 US debt ceiling crisis.
Brian Beathune, an economics professor at Boston College, referring to Republican lawmakers, said: "They must come up with a credible budget agreement that puts deficits on a downward trajectory." (Translated by Qiu Fang and Pan Xiaoyan)
Original article: https://www.toutiao.com/article/7505764742166790683/
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