'Lagging indicator': US treasury secretary blames Biden-era spending for Moody’s credit downgrade

NEW DELHI: US Treasury Secretary Scott Bessent on Sunday dismissed Moody’s decision to downgrade the country’s credit rating, calling it “a lagging indicator” and attributing the development to fiscal policies under the Biden administration. Speaking on CNN, Bessent said the downgrade, which stripped the US of its final triple-A credit rating, reflected spending patterns from the previous four years. “We didn’t get here in the past 100 days,” he said, adding, “It’s the Biden administration and the spending that we have seen over the past four years that we inherited—6.7 per cent deficit-to-GDP, the highest when we weren’t in a recession, not in a war.”Bessent argued that the fiscal strain had been years in the making, citing the inherited deficit-to-GDP ratio as the most severe in peacetime or outside a recession. Moody’s announcement on Friday, however, pointed to broader concerns, including a sustained rise in federal debt levels spanning multiple administrations. The agency projected federal deficits would grow to nearly nine per cent of GDP by 2035, driven by mounting interest payments, rising entitlement costs, and insufficient revenue. Despite the downgrade, Bessent said the current administration was committed to fiscal responsibility. “We are determined to bring the spending down and grow the economy,” he said, maintaining that growth would ultimately outpace debt accumulation. Moody’s had been the last of the three major ratings agencies to maintain a triple-A rating for the US. S&P downgraded its rating in 2011, followed by Fitch in 2023. The credit rating cut comes amid economic uncertainty in Washington. President Donald Trump’s proposal to extend his 2017 tax cuts—estimated at around $5 trillion—suffered a major setback after failing to clear a key vote in Congress. The plan faced opposition from Republican fiscal conservatives, who blocked its advancement, casting doubt on the bill’s future in the House of Representatives. Reacting to the downgrade, Republican Congressman French Hill, who chairs the House Financial Services Committee, said Moody’s move was a stark warning about the country’s fiscal trajectory. “This is a clear signal of the nation’s growing financial instability,” he said.