Moody’s downgrades the U.S. government, citing large fiscal deficits and rising interest costs
By Matt Wirz, The Wall Street Journal, May 16, 2025
Key Points
Moody’s downgraded the U.S. credit rating to Aa1 due to large deficits and rising interest costs.
Runaway budget deficits mean U.S. government borrowing will balloon at an accelerating rate, Moody’s said.
*The move strips the U.S. of its last remaining triple-A credit rating from a major ratings firm.
Runaway budget deficits mean U.S. government borrowing will balloon at an accelerating rate, pushing interest rates up over the long term, Moody’s said. The firm said in a March report that fiscal weakness looked set to continue even under analysts’ best-case scenarios.
The move strips the U.S. of its last remaining triple-A credit rating from a major ratings firm, following similar cuts by Fitch Ratings in 2023 and S&P Global Ratings in 2011. Moody’s downgraded the U.S. to Aa1, a rating also held by Austria and Finland…[end quote]
Anyone can read the Congressional Budget Office’s Budget and Economic Outlook.
Anyone can see that Congress has no intention of balancing the budget, much less reducing the deficit.
From 2025 to 2035, debt swells as increases in mandatory spending and interest costs outpace growth in revenues. Federal debt held by the public rises from 100 percent of GDP this year to 118 percent in 2035, surpassing its previous high of 106 percent of GDP in 1946.
If long-term interest rates stay at current levels or rise the interest on the debt will chew up the budget.
It’s a bipartisan issue that reminds me of the topics that @bjurasz brought up earlier today: plastic pollution and global warming. In all these cases the short-term easy path is leading to a terrible long-term problem. But each decision is based on short-term benefit.
Wendy
but, But, BUT, Freidman said the debt doesn’t matter. The only thing that matters is spending, because it takes capital away from the “JCs”. Doesn’t matter if the spending is paid for with taxes or debt.
Steve…thinks Friedman was a crackpot, whose thinking legitimized the nonsense policies of the last 45 years
A blasphemous idea, we could raise taxes on millionaires and billionaires.
I get the stoopidest idea in America…“billionaires will go broke”. I think we should risk it.
Asian markets have been selling the USD and treasuries for weeks. I have been saying this for months.
We are on a crash collision course with history. It won’t be pretty.
Don’t own anything.
Mid July the debt ceiling has to be raised. Congress might punt for three months. Meanwhile Walmart raises prices, layoffs begin. We are screwed. We will join China in their great depression.
I watched that video and that isn’t what he said. He stated that he preferred debt over taxes and his rationale was rather novel - that the deficit actually creates a headwind (my word) on Congress spending even more than they otherwise would - that if the deficit were to go away over night, Congress would simply increase spending and create a new deficit. Thus, spending is the true problem and while the deficit is a symptom of that problem, it is also a deterrent against even more spending.
I can’t find any argument with that statement. Do you disagree on that likelihood?
First, he said debt was not the problem. Then, he reframed the question to what he wanted to talk about, spending. Then, he denigrated the questioner by saying he was going to explain it “simply”. Then he fired off a cheap shot, saying paying interest on the debt was the least harmful thing the government does.
As far as taxes vs debt, he said that debt is a tax, because property will be taxed to pay the debt. Of course, that doesn’t happen in Shiny-land, because the government borrows more money to pay the bonds as they mature.
He’s a crackpot, who was useful to the “supply side” proponents.
quote=“steve203, post:7, topic:118356”]
He’s a crackpot,
[/quote]
So I ask again, do you agree or disagree with his claim that if the deficit were to go away, spending would simply increase? We all get that you don’t like him, but your dislike of him should have no impact on whether or not you agree with his claim.
Bush #43. Over 8 years, annual spending increased 74.9%. Spending increased, from 02 to 08, before the “deregulated” economy blew up, by 48.3%. Meanwhile, the annual deficit soared.
As offered on this board before, the argument is never about what the government does with money. The argument is always about who benefits from what the government does with money.
Greenspan said that continued government surpluses would be a problem, because it would produce a shortage of Treasuries in the market. I posted that link a while back. Why would a shortage of Treasuries be a problem? Greenspan rattled off a couple, like how Treasuries provide a baseline interest rate that everything else is calculated off of. But a lack of Treasuries would also leave our trading partners with no non-controversial, and liquid, place to put all the dollars that are piling up in their accounts.
Congragulations, @steve203 ! You just solved Greenspan’s “conundrum” of why Treasury yields were stubbornly lower than the Fed predicted after the 2001 recession. The massive trade dollar surpluses were invested by foreigners in Treasuries, suppressing their yields.
A rec for that table laying out the Clinton vs GWB years.
If the party of “fiscal responsibility” was truly what they claimed to be, they would be lauding Clinton as St Willie. Instead it’s all about Monica.
But as far as the national debt, Americans have not totally felt it’s burden yet ( emphasis on yet ). That does not mean that will forever be the case. China and Japan seem to be holding some valuable cards in their pocket, as the current Prez inadvertently and weakly displayed in his tariff “negotiation”. Interest payment on national debt surely sets some type of upper limit on gov spending, doesn’t it ? Sure, we can hyper-inflate, but all of the current politicians will lose their seats of power if that occurs.
Whatever happens, America is playing with fire.
From your link, the Trump 1st term years. Yeah, we can all believe his promise to eliminate the national debt.
Donald J. Trump
2018 3,329.9 4,109.0 -779.1
2019 3,463.4 4,447.0 -983.
2020 3,421.2 6,550.4 -3,129.2
2021 3,580.8 7,249.5 -3,668.7
forgot how to format the table, so in summary,
Trump ran deficits of -779.1, -983, -3,129.2, and
-3668.7 ( $Billion).
Yeah, fiscal responsibility up the wazoo, lol.
#43 said he had an excuse: two made up wars, and a financial crisis (and two “JC” tax cuts). #45 had his excuse too, the plague (and another “JC” tax cut).
