Republicans split on US credit downgrade as party’s tax bill lingers

WASHINGTON: Moody’s downgrade of the US sovereign credit rating has elicited mixed responses among Republicans in Congress, with some questioning the motive behind the change and others depicting it as a warning that lawmakers should heed as they wrestle with a sweeping tax and budget bill.

The downgrade, announced on Friday evening, came only hours after a handful of Republicans on the US House of Representatives’ budget committee blocked progress of President Donald Trump’s tax and spending legislation due to their concerns of its potential to balloon the federal deficit.

The credit rater is the last of the major ratings agencies to strip the US of the highest rating of AAA. Moody’s, which cut the rating one notch to “Aa1”, said it was making the change because successive US administrations of both parties and Congress have failed to reverse annual fiscal deficits and growing interest costs.

Moody’s argued that “current fiscal proposals under consideration” offered insufficient spending cuts.

Nonpartisan analysts estimate the proposed legislation, which in part would extend Trump’s 2017 signature tax cuts, could add trillions to the federal government’s $36.2 trillion in debt.

Representative Jason Smith, the Republican tax committee chairman shepherding the bill, said that Moody’s downgrade was “a cover-up of President Biden’s economic failures.”

“It’s hardly a surprise that the greatest economic cheerleader of Biden’s economic disasters refuses to recognize that Republicans have delivered $1.6 trillion in savings as part of the one, big, beautiful bill,” Smith, from Missouri, said in a statement, referencing the tax and budget legislation.

“This Moody’s downgrade is nonsense,” said Representative Jimmy Patronis, a Florida Republican. “Using credit ratings to hop in a news cycle is irresponsible of them.”

Moody’s did not immediately respond to a request for comment.

The criticism of the rating agency’s move echoes the response to Fitch’s credit downgrade in August 2023, when Biden administration officials argued decisions in Trump’s first term were the cause of the credit hit. Other Republicans — including key tax bill holdouts — depict the downgrade as proof that their fiscal concerns on the proposed legislation are valid.