{"id":16414,"date":"2025-05-20T08:38:55","date_gmt":"2025-05-20T15:38:55","guid":{"rendered":"https:\/\/worldcampaign.net\/?p=16414"},"modified":"2025-05-22T04:06:32","modified_gmt":"2025-05-22T11:06:32","slug":"why-moodys-picked-now-to-downgrade-the-united-states-the-washington-post","status":"publish","type":"post","link":"https:\/\/worldcampaign.net\/?p=16414","title":{"rendered":"“Why Moody\u2019s picked now to downgrade the United States”, The Washington Post"},"content":{"rendered":"\n

Moody\u2019s was trying to tell Republicans in Congress: Don\u2019t do the big tax bill<\/em><\/p>\n\n\n\n

May 19, 2025, Opinion, Heather Long <\/p>\n\n\n\n

The United States has officially lost its perfect credit rating. On Friday, Moody\u2019s, for the first time in its history, downgraded U.S. government bonds<\/a> from the gold star rating of \u201cAAA\u201d to \u201cAA1,\u201d the silver medal equivalent. This wasn\u2019t a total surprise. S&P and Fitch had already lowered the U.S. rating, so this was Moody\u2019s catching up to the crowd. But make no mistake: Moody\u2019s didn\u2019t just pick a random Friday in May to make this move. Moody\u2019s wanted to send a message to Republicans in Congress: Rethink the tax bill. Or, better yet, don\u2019t do it.<\/p>\n\n\n\n

Make sense of the latest news and debates with our daily newsletter<\/a><\/p>\n\n\n\n

The Republicans\u2019 \u201cbig, beautiful bill\u201d is indeed huge. It would add at least $3.3 trillion to the debt<\/a> over the next decade. That\u2019s almost double the price tag of the 2017 GOP Tax Cuts and Jobs Act. In fact, there\u2019s never been anything this large<\/a> done through the reconciliation process that requires only a simple majority to pass legislation.<\/p>\n\n\n\n

Moody\u2019s cited concern over how big the U.S. debt already is (more than\u00a0$36 trillion<\/a>) and how Congress has taken almost no action to stop the annual deficits that keep adding to that tab. But then Moody\u2019s specifically\u00a0stated this<\/a>: \u201cIf the 2017 Tax Cuts and Jobs Act is extended, which is our base case, it will add around $4 trillion to the federal fiscal primary (excluding interest payments) deficit over the next decade.\u201d In other words, Republicans are about to make the situation far worse.<\/p>\n\n\n\n

There are many ways to look at just how scary the U.S. debt situation will soon be. For me, the real panic was when Moody\u2019s spelled out how much of our federal revenue will soon be going solely to interest payments on the debt: It was 9 percent in 2021. It jumped to 18 percent in 2024. By 2035, Moody\u2019s estimates almost a third of revenue will go to interest payments. The typical AAA-rated nation has less than 2 percent of revenue going toward interest, Moody\u2019s notes.<\/p>\n\n\n\n

If this large tax cut goes forward \u2014 and Republicans are pushing hard to make it happen \u2014 it will lead to higher borrowing costs for the nation and for Americans when they apply for mortgages, auto loans and personal loans. We are already seeing a preview of what this will be like for everyone. The yield on the 30-year Treasury bond soared back above 5 percent<\/a>. If this holds, it\u2019s only a matter of time before mortgage ratesclimb to 7 percent again<\/a>.<\/p>\n\n\n\n

Many on Wall Street have cheered as the stock market has rebounded in May, erasing sharp losses from President Donald Trump\u2019s \u201cLiberation Day\u201d tariffs. But that euphoria misses something important: Stocks have recovered, but bonds and the U.S. dollar have not. Investors are still in \u201csell America\u201d mode. They don\u2019t see U.S. assets quite as safe anymore. The U.S. dollar is still down about\u00a08 percent this year<\/a>, and U.S. government bond yields remain\u00a0significantly higher<\/a>\u00a0than where they were heading into Liberation Day. There\u2019s still deep unease about tariffs, higher inflation and now more borrowing for tax cuts.<\/p>\n\n\n\n

There are many costs to the GOP bill. Moody\u2019s focused on the overall price tag, but many on the left have pointed out that the tax cuts themselves are around $5 trillion. The only reason the price tag is lower is because Republicans are proposing to \u201csave money\u201d by slashing programs that help low-income Americans \u2014 mainly Medicaid and SNAP, the food assistance program. The nonpartisan Congressional Budget Office estimates the legislation would cut about 10 million people<\/a> off Medicaid (out of about 80 million now). Even Stephen K. Bannon has warned Republicans not to do this<\/a> because it will hurt many of Trump\u2019s core supporters, especially the working poor and rural poor. And that\u2019s on top of the fact that the proposed tax cuts give a big break to the rich while doing far less \u2014 or even nothing<\/a> \u2014 for those at the bottom.<\/p>\n\n\n\n

Moody\u2019s warning is unlikely to sway House Republicans, but it might impact the Senate. The bigger picture here is that this is a very different economy than in 2017, when the last tax cut occurred. Back then, there was an argument to be made that the U.S. was at a competitive disadvantage to much of the world because of its higher corporate tax rates. But now, the debt is $16 trillion higher than it was on the eve of the 2017 bill\u2019s passage. Investors are less eager to buy U.S. debt. And the nation desperately needs big investments in technology and education to stay competitive against China.<\/p>\n\n\n\n

A tax bill of this size doesn\u2019t make much sense right now. And, if a recession or slowdown arrives because of Trump\u2019s tariffs, do Republicans really want to be championing a tax cut for the rich?<\/p>\n\n\n\n

The GOP tax bill is akin to buying something with a credit card that you really don\u2019t need, and even close friends are saying not to do it.<\/p>\n\n\n\n

By\u00a0Heather Long<\/a> Heather Long is a columnist. She was U.S. economics correspondent from 2017 to 2021 and a member of the editorial board from 2021 to 2024. Before The Post, she was a senior economics reporter at CNN and a columnist and deputy editor at the Patriot-News in Harrisburg, Pa. She also worked at an investment firm in London and was a Rhodes Scholar.follow on X@byHeatherLong<\/a><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Moody\u2019s was trying to tell Republicans in Congress: Don\u2019t do the big tax bill May 19, 2025, Opinion, Heather Long The United States has officially lost its perfect credit rating. On Friday, Moody\u2019s, for the first time in its history, downgraded U.S. government bonds from the gold star rating of \u201cAAA\u201d to \u201cAA1,\u201d the silver medal equivalent. […]<\/p>\n","protected":false},"author":1001004,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[53],"tags":[],"_links":{"self":[{"href":"https:\/\/worldcampaign.net\/index.php?rest_route=\/wp\/v2\/posts\/16414"}],"collection":[{"href":"https:\/\/worldcampaign.net\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/worldcampaign.net\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/worldcampaign.net\/index.php?rest_route=\/wp\/v2\/users\/1001004"}],"replies":[{"embeddable":true,"href":"https:\/\/worldcampaign.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=16414"}],"version-history":[{"count":3,"href":"https:\/\/worldcampaign.net\/index.php?rest_route=\/wp\/v2\/posts\/16414\/revisions"}],"predecessor-version":[{"id":16417,"href":"https:\/\/worldcampaign.net\/index.php?rest_route=\/wp\/v2\/posts\/16414\/revisions\/16417"}],"wp:attachment":[{"href":"https:\/\/worldcampaign.net\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=16414"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/worldcampaign.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=16414"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/worldcampaign.net\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=16414"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}