Moody's Downgrades US Rating Amid Escalating Debt Concerns

In a significant development, Moody's Ratings has downgraded the long-term issuer and senior unsecured ratings of the United States government from Aaa to Aa1. This downgrade, representing a one-notch fall on the agency's 21-point scale, underscores growing anxieties about the surging federal debt and interest obligations, which have swelled substantially over the past decade.

Moody's criticized successive US administrations and Congress for failing to take decisive action to tackle the trend of large and sustained fiscal deficits. The agency expressed skepticism about current fiscal proposals, doubting they would achieve meaningful long-term reductions in mandatory spending and deficit levels.

The downgrade acknowledges the continuing growth in federal spending amid unchanged revenues due to tax reductions. If the 2017 Tax Cuts and Jobs Act persists, it could potentially exacerbate the federal deficit by an estimated USD 4 trillion over the coming decade. Moody's retains a stable outlook at the Aa1 level, praising strong US economic features, such as its global currency dominance and robust institutional frameworks. Nonetheless, it warns that a slip in fiscal discipline could prompt further downgrades.

(With inputs from agencies.)