"Sell America" Fears Emerge After Moody’s Downgrades US Debt

White House National Economic Council Director Kevin Hassett criticized Moody’s Ratings over its decision to lower the US credit rating, calling the move backward-looking and saying the Trump administration is committed to lowering federal spending.

“Make no mistake, the US debt is the safest bet on Earth. There’s no country that I’d rather have than the United States and so Moody’s can do what it wants to,” Hassett said in an interview Monday morning on Fox Business Network.

“It’s a backward-looking thing, penalizing us for all the reckless spending of the Biden administration,” Hassett added, casting the decision as a result of the fiscal policies of President Donald Trump’s predecessor in office, Joe Biden.

Hassett’s comments follow the decision by the credit rater late Friday to downgrade the US to Aa1 from Aaa, raising doubts about the nation’s status as the world’s highest-quality sovereign borrower and highlighting Wall Street’s worries about the nation’s fiscal health. Moody’s joined Fitch Ratings and S&P Global Ratings, becoming the last of the three main ratings firms to downgrade the world’s biggest economy.

Moody’s analysts explained the move by citing inaction by successive US administrations and Congress to address large fiscal deficits. The government’s debt-interest costs ballooned when inflation spiked in the aftermath of the Covid-19 pandemic, and are forecast to reach $1 trillion this year, up from $263 billion in 2017, according to Congress’s Government Accountability Office.

The US debt situation offers to get worse, as Republican lawmakers move ahead on a massive tax package. The tax bill is likely to add to deficits in the coming years. It includes roughly $1.5 trillion in spending cuts over the next decade but that would not cover the roughly $4 trillion in tax cuts outlined in the plan.

The Trump administration has dismissed the Moody’s downgrade, downplaying concerns over government debt and the inflationary impact of the presiddent’s sweeping tariffs on US trading partners.

US Treasury Secretary Scott Bessent told lawmakers earlier this month that his department’s ability to use special accounting maneuvers to stay within the federal debt limit could be exhausted in August. But over the weekend, he dismissed Moody’s as a “lagging indicator.”

Dean Curnutt, Founder and CEO of Macro Risk Advisors, discusses the implications of the US debt downgrade for investors. Dean speaks with Tom Keene and Paul Sweeney on Bloomberg Radio.

Get more on the Bloomberg Surveillance Podcast:

--------

Watch Bloomberg Radio LIVE on YouTube

Weekdays 7am-6pm ET

Follow us on X

Subscribe to our Podcasts:

Bloomberg Daybreak

Bloomberg Surveillance

Bloomberg Intelligence

Balance of Power

Bloomberg Businessweek

Listen on Apple CarPlay and Android Auto with the Bloomberg Business app:

Apple CarPlay

Android Auto

Visit our YouTube channels:

Bloomberg Podcasts

Bloomberg Television

Bloomberg Originals