US Credit Rating Downgraded by Moody’s Amid Soaring Debt Levels
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The credit rating of the United States has been downgraded by Moody’s, citing a significant increase in government debt and interest payment ratios over the past decade. According to a statement released by Moody’s, the downgrade “reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns.”
In a statement, the White House responded to the downgrade, saying it was “focused on fixing Biden’s mess”, while taking a swipe at Moody’s. White House spokesman Kush Desai stated, “If Moody’s had any credibility, they would not have stayed silent as the fiscal disaster of the past four years unfolded.”
A lower credit rating can have significant implications for a country’s economy, making it more likely to default on its sovereign debt and face higher borrowing costs. However, Moody’s maintained that the US “retains exceptional credit strengths such as size, resilience and dynamism and the continued role of the US dollar as the global reserve currency”.
According to Moody’s, federal debt is expected to increase to around 134% of gross domestic product (GDP) by 2035, up from 98% last year. GDP is a measure of all the economic activity of companies, governments, and people in a country. This projection highlights the growing concerns about the US debt burden and its potential impact on the economy.
The downgrade comes at a time of significant economic and political uncertainty in the US. The BBC has reached out to the US Department of Treasury for comment. The downgrade occurred on the same day as President Trump’s landmark spending bill suffered a setback in Congress. Trump’s so-called “big, beautiful bill” failed to pass the House Budget Committee, with some Republicans voting against it.
The US economy has also been showing signs of slowing down. Figures released earlier this year showed that the economy shrank in the first three months of the year, as government spending fell and imports surged due to firms racing to get goods into the country ahead of tariffs. The economy contracted at an annual rate of 0.3%, a sharp downturn after growth of 2.4% in the previous quarter, according to the Commerce Department.
The implications of the downgrade are far-reaching, and it remains to be seen how the US government will respond to the concerns raised by Moody’s. As the world’s largest economy, the US plays a significant role in global economic stability, and any deterioration in its credit rating can have significant spillover effects.
The US government’s ability to manage its debt burden will be closely watched by investors and economists in the coming months. According to the BBC’s source, Moody’s decision to downgrade the US credit rating is a reflection of the growing concerns about the country’s fiscal management.
In response to the downgrade, the White House has accused Moody’s of lacking credibility, citing its silence on the “fiscal disaster of the past four years”. However, the BBC’s source notes that Moody’s has maintained that the US retains exceptional credit strengths, including the size, resilience, and dynamism of its economy.
As the US government navigates these economic challenges, it will be under pressure to demonstrate a commitment to fiscal responsibility and debt management. The downgrade by Moody’s serves as a reminder of the need for the US government to address its debt burden and ensure that its economic growth remains sustainable.
The US credit rating downgrade by Moody’s has significant implications for the country’s economy and global economic stability. As the BBC’s source notes, the downgrade reflects the growing concerns about the US debt burden and its potential impact on the economy. The US government’s response to the downgrade will be closely watched by investors and economists in the coming months.
This is a developing story, and the BBC will continue to provide updates as more information becomes available.
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