NEW YORK (Reuters) – Moody on Friday lowered the U.S. credit rating to “AA1” of “AAA” on the grounds that debt and interest are significantly higher than sovereignty for similar ratings. ”
U.S. President Donald Trump's comprehensive tax bill failed to clear a key procedural barrier on Friday as tough Republicans demanded deeper spending cuts, which prevented the measure, a rare political setback for the Republican president in Congress.
As in writing, the bill would add trillions to the federal government's $36.2 trillion over the next decade.
“The continuous U.S. government and Congress failed to reach a consensus on a trend to reverse the huge annual fiscal deficit and growing interest costs,” Moody's said in a statement.
After the news, U.S. fiscal securities fell and yields rose.
Comment:
Keith Lerner, Co-Chief Investment Officer, TRUIST Consulting Services, Atlanta
“There are some signs that we are acting like this (toward a downgrade). It's surprising that now we've actually passed new legislation on the tax bill.”
“This can give people an excuse to make some profit, but I don’t know that this is a game-changer overall.”
“Now, there is a war in the market where we want higher rates and interactions with interest rates, how much we want to promote growth policies.”
Darrell Duffie, a finance professor at Stanford School of Business, was formerly a Moody's board member
“This basically adds to the evidence that the U.S. has too much debt … I think policymakers have received the information, and I'm not sure how they're going to handle that information. Congress just needs disciplinary action, either getting more income or spending less income.”
Stephen Moore, former senior economic adviser to former President Donald Trump and Heritage Foundation economist
“It's outrageous. Moody's has now become the political arm of the Democratic Party. How to expand Trump's tax cuts to reduce the value of bonds. If U.S.-backed government bonds are not triple assets, what is that?”
Christopher Hodge, chief economist in the United States, Natixis, NY
“Financial domination and irresponsible governance – including the deadlock of permanent debt ceilings – is not something new, and there will be a fiscal day when Congress must pay off debt. The ability of the U.S. to borrow remains irrelevant, but potential incomes are generated, potential incomes are unparalleled. Point markets will impose discipline, which will force cuts, but the current demand for U.S. debt is still abundant.”
