US Credit Rating Downgraded: Moody's Cites Soaring Debt, Political Gridlock

Moody's Downgrades US Credit Rating Amidst Rising Debt and Political Gridlock The United States experienced a significant blow to its economic standing on May 16, 2025, when Moody's Investors Service downgraded its credit rating. The downgrade, a landmark event, reflects growing concerns about the nation's fiscal trajectory and the increasing burden of government debt. This action casts doubt on the US's long-held position as the world's highest-quality sovereign borrower. The downgrade is largely attributed to the projected increase in the federal debt burden, expected to reach 134% of GDP by 2035. This projection is further fueled by ongoing political debates surrounding a proposed large tax cut bill by House Republicans. Bloomberg News' Kailey Leinz explains that this bill, if passed, could add trillions of dollars to the US deficit over the next decade. "They say in the statement, 'We do not believe that material multi-year reductions in mandatory spending and deficits will result from the current fiscal proposals under consideration,'" Leinz reports, highlighting Moody's concerns about the lack of substantial deficit reduction measures. Adding to the complexity, a recent House committee vote on a reconciliation bill failed, with five Republicans joining Democrats in opposition. These Republicans specifically cited the long-term debt issues as their reason for voting against the bill. This unexpected alliance underscores the deep divisions within Congress regarding fiscal responsibility and the urgency of addressing the nation's growing debt. The situation is further complicated by the fact that some proposed spending cuts, such as those to Medicaid, won't take effect until 2029. This delay, according to some fiscal hawks in Congress, is a sign that the current bill is merely postponing the difficult decisions needed to address the deficit. The ongoing negotiations in Congress promise to be intense, with the future of the US's economic standing hanging in the balance.