- Not for nothing is the United States of America considered the most powerful nation in the world. Even though the hitherto unipolar world, where the USA was solely positioned at the top of the economic might, is greatly challenged by other countries like China, leading to a multipolar existence, there’s no denying the former continuing to exercise tremendous heft and traction even now. The dollar continues to be the currency of the world with no palpable challenge to its hegemony in the near future. The USA is the dream destination for the majority of immigrants wishing to pursue their lives in the land of many opportunities. Of course, the narrative may have slightly changed with the ascension of Donald Trump as the president in recent times.
PC: News Express
- However, thousands queuing up to land in the USA haven’t diminished one bit despite the geopolitical and geostrategic situation undergoing tremendous alterations in the last few years. The global community is aware of the upheavals created by the advent of the Trump administration in recent times, causing such ripples. As reported recently, the US just lost its last AAA credit rating due to its debt problem, but any loss of confidence in the US will be bad for all. For the first time in 100 years, America is without an AAA credit rating. Agreed, it’s easy to blame Trump, his tariff mess, and his planned tax cuts for the loss, but this downgrade was a long time coming. S&P, one of the big three rating agencies, had downgraded the US in 2011, under Obama. Fitch followed in 2023, under Biden, and Moody’s did so last week.
PC: InvestorPlace
- While presidents and policies have changed, America’s underlying problem of too much debt has only grown. So, the lower ratings inform lenders that lending to Uncle Sam for the long term isn’t as safe as they think. That’s not to say the US will default on treasury bills due next week, or even T-notes due over the next few years, but the long-term picture isn’t rosy. Reports show that in 2024, the US govt spent $1.8tn more than its revenues. This year, the deficit could touch $2tn. Over the years, cumulative govt debt has crossed $36tn, and is at 125% of GDP. But there are no free lunches even for govts, so the US pays close to $1tn as interest on its borrowings, which is more than its defence expenditure, or its health budget.
PC: ABC News
- To get back to an AAA rating, the US would need to raise revenues by increasing taxes or cutting expenditure. And Trump was expected to do the latter. Setting up a Department of Government Efficiency (DOGE) under Elon Musk was expected to trim government departments, staff strength, and costs. So far, DOGE claims to have saved $160bn, but it can’t go on slashing departments forever. On the other hand, Trump’s tax cuts could add up to $5tn to the deficit over a decade. As such, if the US government debt continues to increase, at some point, not just rating agencies but also investors will get away. This will also lead to a slowing of global growth. Trump didn’t create America’s debt problem, but it’s his job to steer the US towards a more fiscally prudent course.
 with annual interest payments approaching $1 trillion. While Trump's Department of Government Efficiency under Elon Musk claims to have saved $160 billion, the US faces a critical need for fiscal reform through either increased taxes or reduced spending to prevent further economic deterioration and global growth slowdown.){kind=link}