U.S. Economy Faces Mounting Pressure Amid Trump’s Tax Plan and Moody’s Credit Downgrade

WASHINGTON, D.C. — The U.S. economy is under heightened scrutiny following Moody’s recent downgrade of the nation’s credit rating and the advancement of President Donald Trump’s expansive tax-cut proposal. These developments have intensified concerns about the country’s fiscal trajectory and economic stability.

Moody’s Downgrades U.S. Credit Rating

On May 16, Moody’s Investors Service downgraded the U.S. sovereign credit rating from its top-tier “Aaa” to “Aa1,” citing the nation’s escalating $36 trillion debt and persistent fiscal deficits. This marks the first time all three major credit rating agencies have assigned the U.S. a rating below their highest level. Moody’s emphasized that “successive U.S. administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs”.

Trump’s “One Big Beautiful Bill Act” Advances

Concurrently, President Trump’s “One Big Beautiful Bill Act,” a comprehensive tax-cut initiative, has progressed in Congress. The 1,100-page legislation proposes extending the 2017 tax cuts, introducing tax exemptions for tips and overtime pay, offering significant tax breaks for purchasing American-made vehicles, and increasing spending on border security and defense. To offset these measures, the bill suggests deep cuts to social programs like Medicaid and the Affordable Care Act. Nonpartisan analysts estimate the bill could add up to $5 trillion to the national debt over the next decade.

Market Reactions and Economic Outlook

The financial markets have responded negatively to these fiscal developments. U.S. stocks declined, with the Dow Jones Industrial Average dropping 627.86 points (1.47%), the S&P 500 falling 0.99%, and the Nasdaq decreasing 0.75%. Treasury yields rose, with the 10-year reaching 4.53% and the 30-year at 5.01%, following the credit downgrade.

Economists express concern that the combination of increased spending and tax cuts could exacerbate inflationary pressures and hinder economic growth. A Reuters poll indicates that the U.S. economic outlook remains weak, with growth projections for the current quarter at 1.5%, down from the previous year’s 2.8%.

Political and Fiscal Implications

The proposed tax plan has sparked debate within Congress, with some Republicans advocating for deeper cuts to social safety net programs to mitigate the fiscal impact. Critics argue that the plan disproportionately benefits the wealthy and could undermine essential public services. Moody’s downgrade underscores the urgency for policymakers to address the nation’s fiscal challenges and restore confidence in the U.S. economy.

As the “One Big Beautiful Bill Act” moves forward, its reception in the Senate and among the public will be pivotal in determining the future of U.S. fiscal policy and economic stability.