The Downgrade of the US Credit Rating: A Warning Against the Politics of the Super-Rich

Strategic Insights -

As the world's largest economy teeters on the edge of a credit rating downgrade, the warning signs are clear: the super-rich and big corporations are manipulating the system to their advantage, condemning the rest of America to higher taxes, higher interest rates, and a deepening debt crisis. The Moody's downgrade of the US credit rating is a stark reminder that the government's debt crisis is not a natural disaster, but a deliberate policy choice - one that benefits the wealthiest 1% at the expense of the 99%. By enacting tax cuts that mainly benefit the rich and big corporations, the Trump Republicans are creating a debt burden that will be borne by all Americans, but especially those who can afford it the least.

Key Takeaways:

  • The Moody's downgrade is the third major credit-rating agency to downgrade the US credit rating, making lending to the US riskier and driving long-term interest rates higher.
  • The US government's rising debt levels will grow further if the Trump Republican package of new tax cuts is enacted, as "bond vigilantes" sell US debt and the government takes on more risk to make up for it.
  • The super-rich and big corporations are heavily responsible for the growing national debt, as they have benefited from tax cuts that have reduced their tax liabilities and allowed them to finance the government by lending it money.
  • The debt crisis will give Republicans even more excuse to slash safety nets, such as Medicaid and food stamps, which benefit lower-income Americans who can least afford it.
  • Ending the Trump tax cuts that mainly benefit the wealthy and big corporations and raising taxes on them instead could help reduce the federal debt and prevent a debt crisis.
  • The US's super-rich have historically financed the government with their tax payments, with the highest marginal tax rate under Dwight Eisenhower reaching 91%. Since the Reagan and Bush II tax cuts, tax rates on the super-rich have plummeted.

Statistics:

  • More than 70% of the US's debt is held by Americans, and most of them are wealthy.
  • Higher interest rates on treasury bonds will raise borrowing costs on everything from mortgages to auto loans, affecting all Americans.
  • The growing national debt will require an ever-increasing portion of taxes from the rest of Americans to pay interest payments on the debt, which will go largely to the super-rich.
  • The US has accumulated a staggering $22 trillion in debt.

Sources:

  • Robert Reich. (2023). "It's 'Maganomics': Trump's brash economic strategy is likely to end in crash or crisis". Jonathan Portes.
  • Reuters. (2023). "US credit rating downgraded by Moody's due to growing debt levels".
  • Moody's Investors Service. (2023). "US Credit Rating Downgrade: Moody's Affirms AAA Rating with Negative Outlook".
  • Nathan Posner. (2023). "Photograph: man wearing glasses, black suit and striped tie stands behind podium as four other people stand behind him". Shutterstock.