Moody's Issues Alert Regarding US Financial Health
The rating agency Moody’s has raised alarms regarding the fiscal health of the United States, indicating a trajectory toward a multi-year decline attributed to expanding budget deficits and mounting concerns over the sustainability of debt....
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The rating agency Moody’s has raised alarms regarding the fiscal health of the United States, indicating a trajectory toward a multi-year decline attributed to expanding budget deficits and mounting concerns over the sustainability of debt.
This alert follows the national debt exceeding $36 trillion and annual deficits surpassing $1.7 trillion, which raises significant questions about the government’s capacity to fulfill its financial commitments.
“[US] fiscal strength is on course for a continued multiyear decline,” having already “deteriorated further” since Moody’s assigned a negative outlook to America’s AAA credit rating in November 2023, the agency stated in a report on Tuesday, as reported by Financial Times.
In response to growing fiscal challenges, US President Donald Trump has promoted strategies to stabilize the nation’s finances, including substantial tariffs and proposed tax cuts designed to encourage economic growth. However, Moody’s has warned that extending large tax cuts without corresponding spending reductions could worsen the country’s fiscal situation.
“We see diminished prospects that these strengths will continue to offset widening fiscal deficits and declining debt affordability,” the agency noted, according to Reuters.
Republicans are advocating for a $4.5 trillion extension of tax cuts, which would necessitate significant spending cuts, potentially conflicting with Trump’s pledge to safeguard social programs, the agency observed.
The Department of Government Efficiency, led by Elon Musk and tasked with cutting wasteful spending, claims to have saved $115 billion nationwide. Nevertheless, Moody’s argues that these savings are relatively insignificant compared to mandatory spending obligations.
The agency projects that, in the absence of effective policy interventions, America’s debt-to-GDP ratio might escalate from the current 124% to around 130% by 2035, with interest payments potentially consuming about 30% of federal revenue.
Emily Johnson contributed to this article for TROIB News
This alert follows the national debt exceeding $36 trillion and annual deficits surpassing $1.7 trillion, which raises significant questions about the government’s capacity to fulfill its financial commitments.
“[US] fiscal strength is on course for a continued multiyear decline,” having already “deteriorated further” since Moody’s assigned a negative outlook to America’s AAA credit rating in November 2023, the agency stated in a report on Tuesday, as reported by Financial Times.
In response to growing fiscal challenges, US President Donald Trump has promoted strategies to stabilize the nation’s finances, including substantial tariffs and proposed tax cuts designed to encourage economic growth. However, Moody’s has warned that extending large tax cuts without corresponding spending reductions could worsen the country’s fiscal situation.
“We see diminished prospects that these strengths will continue to offset widening fiscal deficits and declining debt affordability,” the agency noted, according to Reuters.
Republicans are advocating for a $4.5 trillion extension of tax cuts, which would necessitate significant spending cuts, potentially conflicting with Trump’s pledge to safeguard social programs, the agency observed.
The Department of Government Efficiency, led by Elon Musk and tasked with cutting wasteful spending, claims to have saved $115 billion nationwide. Nevertheless, Moody’s argues that these savings are relatively insignificant compared to mandatory spending obligations.
The agency projects that, in the absence of effective policy interventions, America’s debt-to-GDP ratio might escalate from the current 124% to around 130% by 2035, with interest payments potentially consuming about 30% of federal revenue.
Emily Johnson contributed to this article for TROIB News
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