Moody's downgrades US rating

In a massive blow to Donald Trump's economic policy, Moody's downgraded the United States' credit rating on Friday, May 16. For the first time ever, the agency removed the US debt's maximum rating of Aaa and downgraded it to Aa1.

Moody's was the last of the three major rating agencies not to downgrade the US debt, retaining its highest rating. The agency justified its decision by citing the rising US debt and its cost to the federal budget. White House communications director Steven Cheung criticized Mark Zandi, chief economist at Moody's Analytics, on the social network X. "No one takes his analyses seriously. He has been proven wrong time and time again," he wrote.

"Successive governments and elected officials have been unable to agree on measures to reverse the trend leading to a significant annual deficit. We do not believe that reductions in spending and the deficit can be achieved with the budget bill currently under discussion," the agency said in a statement.

Several Republican lawmakers on Friday derailed a key vote in Congress on advancing a mega-bill seen as the centerpiece of President Donald Trump's agenda. He is expected to implement the extension of tax credits granted during his first term before they expire at the end of the year.

The bill also calls for $880 billion in budget cuts over a decade, primarily affecting health insurance programs for 70 million low-income Americans.

However, the Republican Party is divided on the issue, based on the priorities of different elected officials, which complicates the process and raises doubts that this major project can be examined next week by the House of Representatives.

Thus, despite Donald Trump's exhortations on his Truth Social network, five Republican elected officials joined forces with Democrats to reject the text before the House of Representatives Budget Committee.

Moody's has provided arguments to those opposed to the bill, saying it expects "even larger deficits over the next decade, with increased spending while revenues remain stable. This will increase the burden of debt on public finances" if the bill is passed.

Republican Rep. French Hill called the agency's decision "a powerful reminder that things are not as they are. We want to restore fiscal stability and address the structural causes of our debt."

The downgrade "is a direct warning: Our fiscal outlook is deteriorating, and House Republicans are determined to make it worse," Brendan Boyle, a Democratic House representative and member of the Budget Committee, said in a statement. "The question is whether Republicans are ready to face up to the damage they are causing," Boyle added.

However, the US economy remains "unique" because of "its depth, the high income it generates, its strong potential growth and its capacity to innovate and strengthen its productivity" , which encourages the agency to maintain its stable outlook for the immediate future.

It calls on the government to "implement tax reforms that will significantly slow down and even reverse the deterioration of public debt and deficits, either by increasing revenues or reducing expenditures."