Moody’s Ratings downgraded the credit rating of the United States by one notch from the highest level of Aaa to Aa1 on Friday due to the expected continuous increase in the country’s debt burden. In response, U.S. Treasury Secretary Benson stated on Sunday that Moody’s Ratings serve as a “lagging indicator” of the country’s financial health.
A lagging indicator is a term used in the financial sector to describe indicators that reflect past economic conditions. Unlike leading and coincident indicators, lagging indicators react only after economic activities have changed. Therefore, lagging indicators are typically used to confirm that economic trends have already shifted.
Benson emphasized during an interview with NBC’s “Meet the Press” that Moody’s is a lagging indicator and represents the views of credit rating agencies by all parties.
He insisted that the situation reflected by this indicator is not related to the Trump administration’s first 100 days in office but rather to the spending policies of the previous government and the past four years.
“We inherited a deficit that reached 6.7% of GDP, the highest during non-recession and non-war times. We are determined to reduce spending and promote economic growth,” he said.
During another interview with CNN’s “State of the Union,” Benson expressed skepticism about Moody’s downgrade. He pointed out that the GDP growth rate will surpass the debt growth rate, stabilizing the debt-to-GDP ratio, which he deemed the most critical figure.
Currently, the Republican-controlled Congress is working on advancing President Trump’s comprehensive tax cut bill. Benson stated that the provisions of this bill extend the 2017 tax cuts implemented during Trump’s first term, which will boost economic growth in the U.S., exceeding the national debt level.
He also emphasized that the current inflation rate in the U.S. is decreasing and is expected to remain within a reasonable range.
Benson also mentioned another aspect that would boost the economy, which is reaching trade agreements with other countries. The U.S. is currently engaged in tariff negotiations with several nations.
“These countries have brought us very good proposals,” Benson told CNN. “I have reviewed these proposals, they want to reduce tariffs, they want to reduce their non-tariff barriers to us, some countries have been manipulating currency… these are very good proposals.”
He stated that the trade situation between the U.S. and countries like China is very concerning, and President Trump aims to renegotiate these trade deals.
Highlighting that President Trump’s “uncertainty” in negotiations is actually an advantage, Benson explained, “Strategic uncertainty is a negotiation tactic. If we provide other countries with too much certainty, they will play us in negotiations,” and he believes that at the end of the negotiations, “American retailers, the American people, and American workers will benefit.”