“I think the downgrade by Moody’s is a lagging indicator; that’s what everyone thinks,” stated Scott Bessent, who holds a position equivalent to that of Finance Minister in European governments, during an interview with CNN referenced by international news agencies.
“I don’t give them much credit,” he added, regarding Moody’s, emphasizing that “the important thing” is that the President returned from a Middle East trip with “billions of dollars” in business promises for American companies.
“We’re seeing confidence from investors, so I don’t give Moody’s much credit,” he added, arguing that the government led by Donald Trump is “trying to cut spending and increase investments, that’s how we’re going to grow the Gross Domestic Product [GDP] faster than debt is growing, and that will stabilize the debt-to-GDP ratio.”
The US finance official’s comments follow Moody’s decision to downgrade its opinion on the credit quality of US sovereign debt to Aa1, lowering it from the highest level of credibility for the first time, and assigning a stable outlook, meaning that no changes are expected in the assessment over the next 12 to 18 months.
Bessent argued that Donald Trump’s fiscal policy is not to blame for Moody’s decision and stated that the US “did not find itself in this situation in the last 100 days,” referring to the timeframe since the billionaire Republican’s return to the White House.
Bessent accuses the administration of former President Joe Biden “and the spending of the last four years” as the cause of the downgrade by Moody’s, which is justified by the financial rating agency not only with the increase in US debt and its cost to the federal budget but also due to the nature of the “budget proposal currently under discussion” in the US Congress.
This mega-project, dear to Donald Trump, aims particularly to extend the tax credits granted during his first term before their expiry and predicts $880 billion, roughly €788 billion, in budget cuts over a decade, primarily affecting the health insurance programs of 70 million low-income Americans.
“We are determined to reduce spending and grow the economy,” Bessent assured on CNN.
Moody’s was the last of the three major financial rating agencies that had not yet downgraded the American debt rating or removed its highest score.
Its competitor Fitch downgraded it one level, to AA+, in 2023, estimating that the repeated political crises over the debt ceiling could undermine the country’s governance.
Standard and Poor’s was the first major rating agency to withdraw the ‘triple A’ from the United States in 2011, and since then, it has not raised the note, which remains at AA+.
Moody’s decision on Friday was justified by the increase in US indebtedness and its cost to the federal budget.
“Successive elected governments have not agreed on measures that would reverse the trend leading to a significant annual deficit,” Moody’s noted.
In a statement, the agency added: “We do not believe that spending and deficit reductions can be achieved with the budget proposal under discussion,” referring to Donald Trump’s desired tax cuts.
