Since his return to the White House on Jan 20, President Donald Trump has pledged to balance the US budget while his Treasury Secretary, Scott Bessent, has repeatedly said the current administration aims to lower US government funding costs.
The administration’s mix of revenue-generating tariffs and spending cuts through Elon Musk’s Department of Government Efficiency have highlighted a keen awareness of the risks posed by mounting government debt, which, if unchecked, could trigger a bond market rout and hinder the administration’s ability to pursue its agenda.
The downgrade comes as Trump’s sweeping tax bill failed to clear a key procedural hurdle on Friday, as hardline Republicans demanding deeper spending cuts blocked the measure in a rare political setback for the Republican president in Congress.
“We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration,” Moody’s said, while forecasting federal debt burden to rise to about 134 per cent of GDP by 2035, compared with 98 per cent in 2024.
The cut follows a downgrade by rival Fitch, which in August 2023 also cut the US sovereign rating by one notch, citing expected fiscal deterioration and repeated down-to-the-wire debt ceiling negotiations that threaten the government’s ability to pay its bills.
Source: CNA
