The government addicted to the United States only lost His triple-A credit rating of Moody's, as he had previously done from other S&P and Fitch rating agencies. Many in Washington shrugged as a minor treatment or as an unfair treatment of the Trump administration. The truth is more sobering: an intermittent red sign that the United States is no longer seen as a “perfect” credit risk and that politicians should stop pretending that economic growth can only rescue us.
Yes, the disaster is real, and it is because the usual deficit financing, the fiscal disease that founding father Alexander Hamilton warned, has become a business as usual.
The calculation occurs when the Republicans of the House of Representatives press to extend the 2017 Trump tax cuts with a “great and beautiful bill.” If it is handled correctly, it is a good idea. But while the legislation aims to avoid tax increases, it combines provisions modestly in favor of growth with a heterogeneous mixture of expensive special interest gifts. Worse, supposes that we can pay another $ 3 billion to $ 5 billion In debt without serious consequences. That is the type of magical thought that stimulated the credit reduction.
Starting with Hamilton, American politicians understood for a long time the importance of fiscal policy guided by the spirit of balanced budgets, low taxes and reduction of constant debt. His vision, combined with a deep respect for contractual reimbursement and financial responsibility, made the United States an creditor nation.
Washington left that honorable legacy in recent decades. The US national debt. Interest payments are now one of the fastest growth of the budget, $ 1 billion in 2026, displacing central priorities and leaves us vulnerable to economic shocks. The Congress Budget Office warning that even modest interest rate increases could lead to hundreds of billions of dollars in additional annual costs. It is not a theoretical problem; It is a real and compound threat.
Which takes us back to the reduction. Historically, sales such as S&P in 2011 or Fitch in 2023 have not caused immediate crises, but the costs of loans gradually increase and gradually erode investors. The sales are not the problem, but the symptoms of a deeper disease: lack of credible fiscal discipline. Market participants are not worried because Moody's wrote a negative report; They are worried because what Moody wrote is true.
If our political class continues to ignore the warnings, the market will do what the qualification agencies only hint: impose real discipline through higher costs of indebtedness, weaker monetary demand and more strict credit conditions. Already, China and other countries have reduced the treasure bond holdings of the United States 42% In 2019 to 30% today.
Meanwhile, the fiscal plan so far embodies Washington's worst habits. Only temporarily does the most important provisions in the growth of tax cuts in 2017, such as Total expense for teams and research and development, while a series of unrelated policies that serve favored industries and constituencies. That is not a tax reform; It is the pork cannon policy dressed as the populist economy.
Worse, the republican supporters of the bill in the Chamber justify it with the fantastic statement that it is fiscally responsible based on the notion that it will raise Billion in income generated by growth. Even the most optimistic models show that the current bill barely moves the growth needle. The administration affirms that growth will be huge once it disregulates and sells active, but these different policies take a long time to bear fruit.
What a lost opportunity. According Foundation The experts, who make only four provisions of permanent cost recovery (bonus depreciation, R&D expenses, complete expenses per factories and reform the limitation of commercial interest) would be more than duplicating the long -term growth benefits of the tax invoice.
That's where legislators must be focused. Not in fiscal exemptions for hand selected industries or energy loans for hand -selected technologies, in structural reforms that maximize investment, innovation and the formation of US capital. Even this fiscal policy in favor of growth must be paired with a real spending restriction, something that we have not seriously seen since the 1990s. Otherwise, any gain of a better fiscal policy will have spilled red ink on them.
The Moody's lesson, and of history, is that the United States cannot borrow its path to prosperity. That was the Secretary of the Treasury Andrew Mellon view In the 1920s, and remains true today. Mellon prepared in silence for breaches of debt by creating budget surpluses, knowing that although international payments could fail, US citizens still had to be paid. That was when Treasury secretaries respected taxpayers.
Now, as then, we are at a crossroads. Will we restore the Hamiltonian principles of fiscal prudence or will we continue along a path where the sales become breaches and our creditors decide the terms of US fiscal policy? The following movement belongs to Congress. Legislators cannot say that they were not warned. If the tax prudence test fails again, we will all pay the price.
Veronique de Rugy He is a senior research member at the Mercatus Center of the George Mason University. This article was produced in collaboration with the creators Syndicate.
