The downgrade to Aa1 from Aaa adds to the bad news for the US president, coming on the same day his flagship spending bill failed to pass a key vote in Congress due to opposition from several Republican fiscal hawks.
Moody’s warned it expects federal deficits to widen to almost nine percent of economic output by 2035, up from 6.4 percent last year, “driven mainly by increased interest payments on debt, rising entitlement spending, and relatively low revenue generation.”
The White House took to X to push back, with communications director Steven Cheung calling one of the Moody report’s authors “an Obama advisor and (Hillary) Clinton donor who has been a Never Trumper since 2016.”
'Fiscal house is not in order'
S&P was the first to cut its rating for the United States back in 2011, during Barack Obama’s first term in office, citing its concerns that a debt management plan “would be necessary to stabilize the government’s medium-term debt dynamics.”
Moody’s echoed its peers in its decision Friday, noting in a statement that “successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs.”
America’s “fiscal performance is likely to deteriorate relative to its own past and compared to other highly-rated sovereigns,“ Moody’s said.
House Republicans “are committed to taking steps to restore fiscal stability, address the structural drivers of our debt, and foster a pro-growth economic environment,“ he said.
On Friday, the agency also changed its outlook from “negative” to “stable,“ noting that despite the United States’ poor record tackling rising government debt levels, the country “retains exceptional credit strengths such as the size, resilience and dynamism of its economy and the role of the US dollar as global reserve currency.”
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