Yahoo Finance

Rating agencies do not appear to be getting optimistic on fiscal improvement for the US government. Yahoo Finance senior columnist Rick Newman joins us now with more. Rick.

Hey, Josh. Uh, well, uh, two of the three big rating agencies have already downgraded US debt. That's S&P Standard and Poor's, which did it back in 2011, and Fitch did it in 2023. Moody's is the one that still has a triple, uh, triple A sterling rating on US debt, but they sound like they may be reconsidering that. So they put out an analysis recently. I'll just give you a couple quotes from this analysis. Uh, US fiscal strength is on course for a continued multi-year decline, driven by widening federal budget deficits, arising debt burden, and falling debt affordability. Uh, they say that the US debt position is far weaker than any other country that has a triple A rating. So these rating agencies don't come out and say it outright. We're, we're considering downgrading a country's, uh, uh, credit rating, but it sure sounds like they could be getting to that conclusion.

Hey, Rick, Christine here. I mean, part of the reason for the downgrades has to do with the, uh, lack of impact from DOD improvements, the lack of that $700 billion in tariff revenue that we were, you know, supposed to be seeing. Of course, with the story changing so frequently, it's, it's unclear of what the trade policy will be. One of the major campaign promises the Trump administration made when they were on the trail was that they would renew these expiring tax cuts for, for businesses and for, you know, folks like us. Um, that money was coming from, you know, some of the tariffs and the other improvements that they were set to make. Do you see a possibility where we don't get a renewal of these tax cuts because obviously we're, you know, the money isn't there. And that was certainly something that people voted on.

I don't think so. I think those tax, uh, the extension of the tax cuts are coming for sure. That, I mean, that's, that is a top Trump economic priority. Uh, it's up there with tariffs. If you could say two Trump economic priorities, extend the tax cuts as one, and keep and impose tariffs as another one. I would add to that actually. Trump has actually promised at least, uh, 10 or 12 additional tax cuts. I mean, go back to the campaign, no tax on tip income, no tax on social security benefits, some other things like that. And Congress is trying to figure out how much of those new tax cuts can we stuff into a big bill by the end of this year. So I think those tax cuts and tax cut extensions are coming. Doesn't mean they're, they're coming permanently. They, uh, in order to make the budget math work, I mean, that this is one of the sort of parlor games inside the beltway in DC is how are they going to make this budget math work. They could say, well, we're not doing this permanently. We're only going to extend these tax cuts for, who knows, two, three, five, seven years, something like that. Uh, there could be a whole mix and match with different tax cuts and things like that. But that is coming. But at some point, um, this is just going to not going to work anymore. There is no way around the fact that those tax cuts are going to make the national debt even larger. Um, and Trump can say, uh, oh, we're, we're claiming all this, these savings from the DOD cuts, from killing federal agencies and stuff. I mean, real budget hawks are looking at this and saying, this doesn't add up to very much. This is, there's a lot of smoke and mirrors here. You cannot fool the bond market with the amount of debt the Treasury is going to be issuing. So, um, something's got to give. Uh, we're all just waiting to find out what it is.

All right, thank you, Rick. Appreciate it.

Yep.