Economist Peter Schiff has sharply criticized Treasury Secretary Scott Bessent for downplaying the role of President Donald Trump's tax cuts in the recent Moody's downgrade of the U.S. sovereign credit rating, instead pinning the blame on the Joe Biden administration.
What Happened: Schiff's comments, posted on X, come amid heated debates over the nation's fiscal health as the U.S. debt continues to spiral, now standing at a staggering $36.22 trillion.
In his post, Schiff highlighted that Moody's specifically cited the extension of Trump's 2017 tax cuts as a key reason for its decision to downgrade the U.S. credit rating from Aaa to Aa1 on May 16, 2025.
However, Bessent, in television interviews earlier on May 18, dismissed Moody's action as a "lagging indicator," arguing that the downgrade reflected the Biden administration's spending policies rather than the tax cuts.
Bessent further claimed that the tax bill, which advanced through the House Budget Committee on May 18, would spur economic growth sufficient to outpace the nation's debt obligations. "I think that Moody's is a lagging indicator," Bessent said on NBC News' Meet the Press, adding, "That's what everyone thinks of credit agencies."
Schiff pushed back strongly against Bessent's narrative, accusing him of sidestepping the real issue.
Why It Matters: The downgrade, which ended Moody's century-long pristine rating of the U.S. since 1919, was attributed to concerns over the nation's growing debt pile and the projected increase in fiscal deficits.
According to Moody's, the extension of these tax cuts—originally set to expire in 2025—would exacerbate the deficit, with nonpartisan analysts estimating an additional $3 trillion to $5 trillion added to the national debt over the next decade.
The agency also warned that the U.S. debt-to-GDP ratio could climb to 134% by 2035 if current trends persist.
Price Action: The SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 index and Nasdaq 100 index, respectively, fell in premarket on Monday. The SPY was down 0.98% to $588.40, while the QQQ declined 1.40% to $514.19, according to Benzinga Pro data.
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