Moody's Pushes U.S. Out Of Elite 'AAA' Credit Club, Citing Rising Debt On Friday, the agency changed its outlook on the U.S. to "stable" from "negative."
Moody's downgraded the U.S. sovereign credit rating on Friday due to concerns about the nation's growing $36 trillion debt pile. This move could complicate President Donald Trump's efforts to cut taxes and send ripples through global markets.
Moody's first gave the United States its pristine "Aaa" rating in 1919 and is the last of the three major credit agencies to downgrade it.
Friday's cut by one notch to "Aa1" follows a change in 2023 in the agency's outlook on the sovereign due to wider fiscal deficits and higher interest payments.
"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 said on Friday, as it changed its outlook on the U.S. to "stable" from "negative."
The announcement drew criticism from people close to Trump.
Stephen Moore, former senior economic advisor to Trump and an economist at Heritage Foundation, called the move "outrageous". "If a US-backed government bond isn't a triple-A asset then what is?" he told Reuters.
White House communications director Steven Cheung reacted to the downgrade via a social media post, singling out Moody's economist, Mark Zandi, for criticism. He called Zandi a political opponent of Trump.
Zandi declined to comment. Zandi is the chief economist at Moody's Analytics, which is a separate entity from the credit ratings agency Moody's.
Since his return to the White House on January 20, Trump has said he would balance the budget, while his Treasury Secretary, Scott Bessent, has repeatedly said the current administration aims to lower U.S. government funding costs.
But the administration's attempts to raise revenue and cut spending have so far failed to persuade investors.
Trump's attempts to cut spending through Elon Musk's Department of Government Efficiency have fallen far short of its initial goals. And attempts to raise revenue through tariffs have sparked concerns about a trade war and global slowdown, roiling markets.
Left unchecked, such worries could trigger a bond market rout and hinder the administration's ability to pursue its agenda.
The downgrade, which came after market close, sent yields on Treasury bonds higher, and analysts said it could give investors a pause when markets re-open for regular trading on Monday.
"It basically adds to the evidence that the United States has too much debt," said Darrell Duffie, a Stanford finance professor who was formerly on Moody's board. "Congress is just going to have to discipline itself, either get more revenues or spend less."
Trump is pushing lawmakers in the Republican-controlled Congress to pass a bill extending the 2017 tax cuts that were his signature first-term legislative achievement, a move that nonpartisan analysts say will add trillions to the federal government's debt.
The downgrade came as the tax bill failed to clear a key procedural hurdle on Friday, as hardline Republicans demanding deeper spending cuts blocked the measure in a rare political setback for the Republican president in Congress.
Moody's said the fiscal proposals under consideration were unlikely to lead to a sustained, multi-year reduction in deficits, and it estimated the federal debt burden would rise to about 134% of GDP by 2035, compared with 98% in 2024.
"Moody's downgrade of the United States' credit rating should be a wake-up call to Trump and Congressional Republicans to end their reckless pursuit of their deficit-busting tax giveaway," Senate Democratic Leader Chuck Schumer said in a statement on Friday. "Sadly, I am not holding my breath."
The cut follows a downgrade by rival Fitch, which in August 2023 also cut the U.S. sovereign rating by one notch, citing expected fiscal deterioration and repeated down-to-the-wire debt ceiling negotiations that threaten the government's ability to pay its bills.
Fitch was the second major rating agency to strip the United States of its top triple-A rating, after Standard & Poor's did so after the 2011 debt ceiling crisis.
"They have got to come up with a credible budget agreement that puts the deficit on a downward trajectory," said Brian Bethune, an economics professor at Boston College, referring to Republican lawmakers.
Investors use credit ratings to assess the risk profile of companies and governments when they raise financing in debt capital markets. Generally, the lower a borrower's rating, the higher its financing costs.
"The downgrade of the US credit rating by Moody's is a continuation of a long trend of fiscal irresponsibility that will eventually lead to higher borrowing costs for the public and private sector in the United States," said Spencer Hakimian, chief executive at Tolou Capital Management, a hedge fund.
Long-dated Treasury yields, which rise when bond prices decline, could go higher on the back of the downgrade, said Hakimian, barring news on the economic front that could increase safe-haven demand for Treasuries.
The downgrade follows heightened uncertainty in U.S. financial markets as Trump's decision to impose tariffs on key trade partners has, over the past few weeks, sparked investor fears of higher price pressures and a sharp economic slowdown.
"This news comes at a time when the markets are very vulnerable, and so we are likely to see a reaction," said Jay Hatfield, CEO at Infrastructure Capital Advisors.
Consumer sentiment dips further in May.
US consumer sentiment edged down further in May, to 50.5 from 52.2 in April, according to the University of Michigan Survey of Consumers. That brings the index to just above its June 2022 level of 50, which was the lowest level on record.
The consumer sentiment index is arbitrarily set to 100 for 1966. So the absolute number is not meaningful, but rather the change in the index over time. The extent and speed of the recent sentiment drop is unusually large by historical standards, suggesting a rapid souring of consumers’ view of current and prospective US economic conditions. Consumer sentiment has been shown to have a predictive effect on actual consumer spending behavior, although the impact is limited.
Inflation expectations rose further. Consumers surveyed now expect on average that inflation will be 7.3% over the next twelve months, up from 6.5% expected last month. Over the next five years, they expect inflation to average 4.6%.
Are these inflation expectations justified? A very cursory (AI-assisted) review suggests that nearly all (perhaps 90%) of a US tariff increase is passed through to the prices faced by US producers and consumers. At the currently imposed rates, tariffs have increased from less than 2.7% before Trump’s actions to about 18% today. At these rates, the increased tariffs might raise import prices and costs by, say, 13-14%. Since, by some estimates, consumer goods have a total direct and indirect import content of roughly 10%, consumer prices might rise perhaps 1-2 percentage points.
(Clearly, this deserves a separate post, but that’s my quick back-of-the-envelope estimate. Ya’ll can tell me how this is wrong…)
This suggests to me that consumers’ expectations of tariff-related inflation may be overblown, unless tariffs are ultimately raised substantially above their current levels. (Of course,e they may have other reasons to think that inflation will rise, such as burgeoning federal deficits or deportation-related labor shortage concerns.) The inflationary tariff impact, when it comes, is likely to be a one-time burst, not a persistent increase in annual inflation, as long as higher inflation expectations do not feed through to higher ongoing annual wage and intermediate goods price hikes.
In any case, US consumer sentiment continues to sour, with tariffs and trade policy a major problem. How trade issues and related uncertainties are resolved in the coming weeks or months may go a long way to determining whether consumers continue to have a bleak outlook about the course of the economy and inflation, and therefore whether they will more aggressively cut back on spending, significantly weakening the overall US economy.
Hardline Republicans in the U.S. House of Representatives blocked President Donald Trump's sweeping tax bill on Friday over concerns it did not do enough to cut spending, hours before Moody's stripped the federal government of its once top-tier credit rating.
Trump is pushing lawmakers in the Republican-controlled Congress to pass a bill extending the 2017 tax cuts that were his signature first-term legislative achievement, a move that nonpartisan analysts say will add trillions to the federal government's $36.2 trillion in debt.
Moody's, which was the last of the three major ratings agencies to rate U.S. AAA, warned that the nation's debt burden could reach 134% of gross domestic product by 2035, compared with 98% in 2024.
"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," Moody's wrote, adding that they didn't see enough spending cuts from current fiscal proposals under consideration."
The Republican-controlled House Budget Committee on Friday rejected the tax bill, which would also eliminate taxes on some tips and overtime income, boost defense spending, and provide more funds for Trump's border crackdown. The committee's chairman, Representative Jodey Arrington of Texas, scheduled a rare Sunday night session to try again.
The federal government for years has spent more than it has taken in. Moody's said it expected the U.S.'s fiscal performance to deteriorate compared with other highly developed economies.
The Friday House Budget Committee vote rejecting the bill represented a rare political defeat for the Republican president, who had urged Republicans on social media to "UNITE behind" the legislation, saying, "We don't need 'GRANDSTANDERS' in the Republican Party."
Five of 21 Republicans on the panel voted to block the measure, saying they would continue to withhold support unless Speaker Mike Johnson agreed to further cuts to the Medicaid healthcare program for lower-income Americans and the full repeal of green energy tax cuts implemented by Democrats.
Representative Ralph Norman, one of the hardline conservatives who voted against the bill, defended his decision.
"This isn't a grandstand," the South Carolina Republican told reporters. "We'll compromise somewhere, but just not giving the farm."
Republicans are divided between hardliners who view the package as their best chance to cut spending and more moderate Republicans from competitive districts, who have warned that deeper spending cuts to social safety net programs could jeopardize the 220-213-seat House Republican majority in the 2026 midterm elections.
Arrington told lawmakers at the hearing that the legislation would deliver on a promise to voters who elected Trump and gave the party full control of Congress last November.
Item 1 of 2 A graduate has her photo taken at the U.S. Capitol on the day U.S. President Donald Trump's sweeping tax bill failed to clear a key procedural hurdle as hardline Republicans demanding deeper spending cuts blocked the measure in a rare political setback for the Republican president in Congress, in Washington, D.C., U.S., May 16, 2025. REUTERS/Kevin Lamarque
[1/2]A graduate has her photo taken at the U.S. Capitol on the day U.S. President Donald Trump's sweeping tax bill failed to clear a key procedural hurdle as hardline Republicans demanding deeper spending cuts blocked the measure in a rare political setback for the Republican president in Congress, in... Purchase Licensing Rights, opens new tab Read more
"I am confident we will get to a good place this weekend and have the votes to pass it out of Committee Sunday evening," the Texas Republican said in a statement following the vote.
Republican Representatives Norman, Chip Roy, Andrew Clyde, Josh Brecheen, and Lloyd Smucker joined all 16 Democrats on the committee in voting against the measure.
"We are writing checks we cannot cash, and our children are going to pay the price. So, I am a 'no' on this bill unless serious reforms are made," Roy, of Texas, told the committee.
The lawmakers said they hoped to reach a deal with Johnson to amend the bill over the weekend.
Roy, Norman, Clyde, and Brecheen are members of the ultraconservative House Freedom Caucus, which later said in a social media post: "We are not going anywhere and we will continue to work through the weekend."
Smucker said his "no" vote, changed from an initial "yes," was a parliamentary maneuver meant to ensure the measure can be taken up again once Johnson has brokered an agreement.
Congress's bipartisan Joint Tax Committee estimates the tax cuts would cost $3.72 trillion over a decade. In a May 16 letter, the nonpartisan Congressional Budget Office confirmed that the tax package would not exceed a $4.5 trillion ceiling imposed by the budget committee.
Trump has highlighted measures including lifting taxes on tips and overtime,e that Republicans say would boost working-class Americans, while critics say the bill will offer more benefits to the wealthy.
The sweeping bill would also eliminate a tax on silencers for firearms.
Democrats condemned the legislation as a vehicle for giving billionaires tax cuts, while citing a projection from nonpartisan congressional researchers that proposed spending cuts to Medicaid and federally subsidized private health insurance available through the Affordable Care Act could lead to 8.6 million Americans losing health coverage.
"No other previous bill, no other previous law, no other previous event caused so many millions of Americans to lose their healthcare. Not even the Great Depression," said Representative Brendan Boyle, the committee's top Democrat.
The proposed legislation would impose work requirements on Medicaid beginning in 2029. Hardliners want those to begin immediately and have called for a sharp reduction in federal contributions to Medicaid benefits available to working-class people through the Affordable Care Act - an option vehemently opposed by Republican moderates.
Charter Communications has offered to acquire Cox Communications, a $34.5 billion merger that would combine two of the top three cable companies in the U.S.
Cox is the third-largest cable television company in the country, with more than 6.5 million digital cable, internet, telephone, and home security customers. It has a strong foothold in states spanning from California to Virginia. Charter Communications, known more widely as Spectrum, has more than 32 million customers in 41 states.
The cable industry has been under assault for years from streaming services like Disney, Netflix, Amazon, and HBO Max, as well as internet plans offered by mobile phone companies. Comcast, which is of nearly equal size to Charter, spun off many of its cable television networks in November as consumers increasingly swap out their cable TV subscriptions for streaming platforms.
So-called “cord-cutting” has cost the industry millions of customers and left them searching for ways to successfully compete.
Charter said Friday that it will acquire Cox Communications’ commercial fiber and managed IT and cloud businesses. Cox Enterprises will contribute Cox Communications’ residential cable business to Charter Holdings, an existing subsidiary partnership of Charter.
Cox Enterprises will own about 23% of the combined company’s outstanding shares.
The transaction, which needs approval from Charter shareholders as well as regulators, includes $12.6 billion in debt.
“This merger exemplifies the strategic consolidation reshaping media and telecom,” Scott Purdy, KPMG U.S. Media Industry Lead, Strategy, said in a statement. “By pooling resources, these companies will create scale, drive significant cost synergies, and strengthen their competitive positioning in a challenging market.”
The proposed deal is one of the largest in over a year. Mars announced a $30 billion deal with Kellanova last summer, and Exxon Mobil’s approximately $60 billion acquisition of Pioneer Natural happened in late 2023.
The combined company will change its name to Cox Communications within a year after closing. It will keep Charter’s headquarters in Stamford, Connecticut, and have a significant presence on Cox’s Atlanta, Georgia, campus following the closing.
After the deal is complete, Charter CEO Chris Winfrey will become president and CEO of the combined company. Cox CEO and Chairman Alex Taylor will serve as chairman.
Cox will be able to keep two directors on the 13-member board. Advance/Newhouse, which is part of Charter, will retain its two board members.
The transaction is expected to close at the same time as Charter’s merger with Liberty Broadband, which was approved by Charter and Liberty Broadband stockholders in February.
Shares of Charter rose slightly in afternoon trading. Cox is a private company.
A federal judge in Texas struck down guidance from a government agency establishing protections against workplace harassment based on gender identity and sexual orientation.
Judge Matthew J. Kacsmaryk of the U.S. District Court for the Northern District of Texas on Thursday determined that the U.S. Equal Employment Opportunity Commission exceeded its statutory authority when the agency issued guidance to employers against deliberately using the wrong pronouns for an employee, refusing them access to bathrooms corresponding with their gender identity, and barring employees from wearing dress code-compliant clothing according to their gender identity because they may constitute forms of workplace harassment.
Title VII of the 1964 Civil Rights Act protects employees and job applicants from employment discrimination based on race, color, religion, sex, and national origin.
The EEOC, which enforces workplace anti-discrimination laws, updated its guidance on workplace harassment in April of last year under President Joe Biden for the first time in 25 years. It followed a 2020 Supreme Court ruling that gay, lesbian, and transgender people are protected from employment discrimination.
Texas and the Heritage Foundation, the conservative think tank behind Project 2025, in August challenged the guidance, which the agency says serves as a tool for employers to assess compliance with anti-discrimination laws and is not legally binding. Kacsmaryk disagreed, writing that the guidance creates “mandatory standards ... from which legal consequences will necessarily flow if an employer fails to comply.”
The decision marks the latest blow to workplace protections for transgender workers following President Donald Trump’s Jan. 20 executive order declaring that the government would recognize only two “immutable” sexes — male and female.
Kacsmaryk, a 2017 Trump nominee, invalidated all portions of the EEOC guidance that define “sex” to include “sexual orientation” and “gender identity,” along with an entire section addressing the subject.
“Title VII does not require employers or courts to blind themselves to the biological differences between men and women,” he wrote in the opinion.
Heritage Foundation president Kevin Roberts commended the decision in an emailed statement: “The Biden EEOC tried to compel businesses — and the American people — to deny basic biological truth. Today, thanks to the great state of Texas and the work of my Heritage colleagues, a federal judge said: Not so fast.”
He added, “This ruling is more than a legal victory. It’s a cultural one. It says no, you don’t have to surrender common sense at the altar of leftist ideology. You don’t have to pretend men are women.”
Texas Attorney General Ken Paxton also touted the victory against “Biden’s ‘Pronoun Police’ Rule” in a Friday press release, saying: “The federal government has no right to force Texans to play along with delusions or ignore biological reality in our workplaces.”
The National Women’s Law Center, which filed an amicus brief in November in support of the harassment guidance, blasted the decision in an emailed statement.
“The district court’s decision is an outrage and blatantly at odds with Supreme Court precedent,” said Liz Theran, senior director of litigation for education and workplace justice at NWLC. “The EEOC’s Harassment Guidance reminds employers and workers alike to do one simple thing that should cost no one anything: refrain from degrading others on the job based on their identity and who they love. This decision does not change the law, but it will make it harder for LGBTQIA+ workers to enforce their rights and experience a workplace free from harassment.”
Kacsmaryk offered a more narrow interpretation of Bostock v. Clayton County, the landmark Supreme Court case that established discrimination protections for LGBTQ+ workers, saying in his decision that the Supreme Court “firmly refused to expand the definition of ‘sex’ beyond the biological binary,” and found only that employers could not fire workers for being gay or transgender.
Employment attorney Jonathan Segal, a partner at Duane Morris who advises companies on how best to comply with anti-discrimination laws, emphasized that legal minds may disagree on the scope of Bostock, and Kacsmaryk’s decision is just one interpretation.
“If you assume that a transgender employee has no rights beyond not being fired for transgender status, you are likely construing their rights too narrowly under both federal and state law,” which would put employers in a risky position, Segal said.
And regardless of whether explicit guidance is in place, employers still need to address gender identity conflicts in the workplace, according to Tiffany Stacy, an Ogletree Deakins attorney in San Antonio who defends employers against claims of workplace discrimination.
“From a management perspective, employers should be prepared to diffuse those situations,” Stacy said.
The EEOC in fiscal year 2024 received more than 3,000 charges alleging discrimination based on sexual orientation or gender identity, and 3,000-plus in 2023, according to the agency’s website.
The U.S. Department of Justice and the EEOC declined to comment on the outcome of the Texas case.
EEOC Acting Chair Andrea Lucas, a Trump appointee, voted against the harassment guidelines last year but has been unable to rescind or revise them after Trump fired two of the three Democratic commissioners, leaving the federal agency without the quorum needed to make major policy changes.
But earlier this month, Trump tapped an assistant U.S. attorney in Florida, Brittany Panuccio, to fill one of the vacancies. If Panuccio is confirmed by the Senate, the EEOC would regain a quorum and establish a Republican majority 2-1, clearing the path to fully pivot the agency toward focusing on Trump’s priorities.
“It is neither harassment nor discrimination for a business to draw distinctions between the sexes in providing single-sex bathrooms,” Lucas wrote in a statement expressing her dissent to that aspect of the guidelines.
In her four-month tenure as Acting Chair, Lucas has overhauled the agency’s interpretation of civil rights law, including abandoning seven cases representing transgender workers alleging they have experienced discrimination, and instructing employees to sideline all new gender identity discrimination cases received by the agency.
