onOn Friday, the US credit rating was downgraded. Rating agency Moody’s has announced that government debt levels will grow even further if a new Trump Republican package of tax cuts is enacted. This increases the risk of lending to the US.
Moody’s is the third of three major credit rating agencies that will downgrade US credit ratings.
The so-called “bond vigilantes” have already sold US government debt as Republican tax packages move through Congress. They are expected to sell more, further increasing long-term interest rates and compensate for the increased risk of holding US debt.
Some right-wing Republicans in Congress use Moody’s downgrade to justify deeper spending cuts for Medicaid, food stamps, and other social programs on which low-income Americans rely on.
But hello? The way to reduce federal debt is much easier. It’s just going to end Trump’s tax cuts, which are primarily wealthy and profitable for large corporations – and instead increase Taxes on them.
I am old enough to remember that the super-rich people in the US funded the government with their tax payments. Under Dwight Eisenhower – almost no left-wing extremists, but the highest marginal tax rate was 91%. (The way for the ultra-rich people who exceed half the highest marginal income of taxes, even after all tax credits and deductions have become easier.)
However, tax rates for the ultra-rich people have plummeted since the Reagan, George W. Bush and Trump’s one tax cut.
So, instead of funding the government with taxes, the ultra-rich people have been funding the US government. Please lend me your money.
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(You may have heard that US debts are held primarily by foreigners. It’s wrong. Over 70% of them are held by Americans – And most of them are wealthy. )
This is because taxes continue to increase from rest We are dedicated to paying ever-growing interest payments on our debts.
So, when US debt is downgraded, most Americans can pay in three different ways, as Trump Republicans plan another major tax cut that will primarily benefit wealthy and large corporations.
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They will pay evenly more Interest in growing debt – for the super wealthy.
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They will pay higher interest on all other long-term debt. (As the higher fees on Treasury bonds run through the economy, they increase the borrowing costs for everything from mortgages to car loans.)
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The debt crisis will give Republicans more excuses to do what they always want to do: reducing their safety net. Many Americans can lose benefits they rely on, such as Medicaid and food stamps.
The “Vibilants of Bonds” is not the cause of this absurdity. There are no Moody or other credit rating agencies either. Furthermore, there will be no increase in national debt in this regard.
What is the underlying cause? Follow the money. Lowering taxes at the expense of most Americans is an increasing political power of ultra-rich and large corporations.
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Former U.S. Secretary of Labor, Robert Reich is Professor Emeritus of Public Policy at the University of California, Berkeley. He is a Guardian US columnist. His newsletter can be found at robertreich.substack.com