Treasury Secretary Scott Bessent asserts that President Trump’s tax reform will stimulate the economy, even as Moody’s downgrades the U.S. credit rating.
At a Glance
- Treasury Secretary Bessent downplays Moody’s downgrade impact.
- Moody’s cites national debt and budget deficits for the downgrade.
- Bessent believes Trump’s tax plan will drive economic growth.
- The U.S. credit rating lowered from Aaa to Aa1 by Moody’s.
Moody’s Downgrade and Bessent’s Reaction
Treasury Secretary Scott Bessent has addressed Moody’s recent decision to degrade the U.S. credit rating from Aaa to Aa1, amid concerns over rising national debt and budget deficits. Bessent described the downgrade as a “lagging indicator” and emphasized that the current fiscal issues stem from the previous administration’s spending policies.
Bessent assured that the anticipated economic growth from President Trump’s tax reform proposal would offset these fiscal challenges. He underscored the confidence the Trump administration has in its tax plan, projecting that the tax cuts would greatly contribute to economic expansion.
Underlying Causes of the Downgrade
Moody’s cited increased government debt and widening budget deficits over the past decade as central to their decision. They expressed concerns over successive U.S. administrations’ inability to agree on measures to mitigate large fiscal deficits and escalating interest costs. This downgrade marks an end to an era where Moody’s was the last major agency to maintain a triple-A rating for U.S. sovereign debt.
“Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs” – Moody’s.
Moody’s also adjusted its outlook for the U.S. from “negative” to “stable,” suggesting that although there are concerns, the future fiscal outlook is less dire.
Confidence in Future Economic Growth
Bessent remains optimistic, asserting that the anticipated economic benefits of the tax reforms would enable the U.S. to outpace its rising debt. He expressed confidence that legislative measures in Congress will further support economic growth and contribute to stabilizing the fiscal outlook.
“I don’t put much credence in the Moody’s” – Scott Bessent.
White House Press Secretary Karoline Leavitt reinforced this confidence by highlighting recent economic improvements, including dropping inflation, reduced oil and gas prices, and notable job growth. These indicators, she argued, demonstrate the strength and resilience of the U.S. economy despite the downgrade.
