U.S. government faces credit downgrade as debt mounts

In May 2025, the U.S. stock market experienced fluctuations in response to the growing concerns about the nation's unsustainable debt levels. Major credit-rating agency Moody's Ratings announced that they, along with the other two major rating agencies, have downgraded the U.S. federal government's credit rating from a top-tier 'Aaa'. This alarming shift highlights the country's escalating financial troubles stemming from an increasing debt burden. The S&P 500, Dow Jones Industrial Average, and other stock indices showed slight changes, with the S&P 500 rising by only 0.1% amid such dire news. The Congressional Budget Office revealed that the mounting debt is impacting Washington's financial capability to respond effectively to possible future emergencies. President Donald Trump's proposed legislation is projected to add another $3.8 billion to the national debt, further aggravating the problem. Analysts are cautious as spending on interest has tripled since 2017, urging that excessive deficits could hinder the government's ability to act decisively during crises like health emergencies or financial meltdowns. Such risks are crucial, as they may lead to increased borrowing costs and could negatively impact the living standards of average Americans. Kristina Hooper, chief market strategist at Man Group, pointed out that as the government diverts more resources to pay interest on debt, there are fewer funds available for more productive investments. This strain could lead to a deterioration of economic growth and a lower standard of living for citizens. The growing public debt is becoming a critical issue that all Americans should consider, with discussions on fiscal sustainability gaining urgency among economists and policy-makers alike. Investors have begun demanding higher rates from U.S. debt instruments, indicating a nascent concern among market participants. There is also a looming specter of a potential full-blown debt crisis, where the burden becomes so massive that investor confidence collapses. According to Douglas Holtz-Eakin, president of the American Action Forum, the situation is precarious. Some argue that the U.S. cannot sustain its power if it spends more on interest than on defense. The long-term implications of failing to manage national debt effectively are being met with skepticism, potentially leading to a debt crisis reminiscent of that experienced by Greece and Portugal.