After 25 Years of Failed Leadership, the Bill is About to Come Due.
Photo by Alice Pasqual on Unsplash
On May 16, 2025, Moody’s downgraded its U.S. credit rating. Moody’s was the last of the three major agencies to cut the U.S. credit rating. Standard & Poor’s made the change in 2011; Fitch made the change in 2023. Over the last several months, I have written extensively about the failures of Washington’s leadership on this topic. (The links are below.)
Where we are now is the result of a quarter century of poor leadership. President Clinton was the last to balance the federal budget. Since then, the debt has dramatically increased.
Apologists for each administration will point to black swan events that drove their spending. (9/11, wars, financial market collapse, COVID, etc.) It is important to point out that both Trump and Biden increased the deficit in four years, as much as Obama did in eight. Obama’s budget director recently wrote an Op-Ed in The New York Times, saying there is a problem now without acknowledging that they are part of the reason.
Moody’s reasons given for their downgrade decision are:
“Successive U.S. administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs. We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration. Over the next decade, we expect larger deficits as entitlement spending rises while government revenue remains broadly flat. In turn, persistent, large fiscal deficits will drive the government’s debt and interest burden higher. The U.S.’ fiscal performance is likely to deteriorate relative to its own past and compared to other highly-rated sovereigns.”
The global reaction is consistent. Many investors now see the U.S. as a riskier investment, which is driving yields on U.S. Treasury Bonds higher and putting pressure on overall interest rates. The current budget bill is projected to increase the debt by $2 to $3 trillion.
The three greatest adversaries to effective leadership are fear, uncertainty, and doubt. Uncertainty is an immutable fact of the human condition. As leaders, our job is to mitigate the risks of uncertainty and create and communicate plans that reduce the doubt uncertainty creates. These combine to reduce fear, making it easier for our teams to move forward with confidence. Unfortunately, we are living in a world where uncertianty is growing.
Related Articles
Moody’s Ratings downgrades United States ratings to Aa1 from Aaa | Moody’s
Global investors don’t trust the U.S. | Axios
Trump’s Trade War Is Strengthening China’s Soft Power | Wired
Six-Chart Sunday – Deals or No Deals? | Bruce Mehlman’s Age of Disruption
Trump Has Added Risk to the Surest Bet in Global Finance | The New York Times
Why everyone is suddenly so interested in U.S. bond markets | BBC
What’s going on in the US Treasury market, and why does it matter? | Brookings
Are Trump’s Policies Leading to Higher Treasury Yields? | Morningstar
Is the national debt good or bad? | Marketplace
Why Washington’s Huge Tax Bill Is Worrying Bond Investors | The New York Times
Uncertainty is on the rise. Here’s how people can cope | ScienceNews
Ray Dalio says the risk to U.S. Treasurys is even greater than what Moody’s is saying | CNBC
My Previous Newsletters
May 6, 2025 - Leadership Operates in a Constant State of Uncertainty
March 21, 2025 - The Federal Debt: Decades of Absent Leadership
February 16, 2025 - There Are Many Different Leadership Styles – Chaos Is Not One of Them
October 27, 2024 - An Example of Poor Analytics - The Federal Debt
Chips and Salsa: Snack-sized news and posts
Here is how the government spends our money. USAFacts is an excellent source of information about our government.
2024 government revenue and spending | USAFacts
If you love movies like I do, this is fascinating. It is also a great example of how to approach a data analytics initiative – Form a hypothesis, ask good questions, look at the results, assess the results, and repeat as often as necessary.
Which Old Movies Stand the Test of Time? A Statistical Analysis | Stat Significant
Here is an interesting perspective on AI. The tagline in my feed was “The Cult of AI.”
If Anthropic Succeeds, a Nation of Benevolent AI Geniuses Could Be Born | Wired
It is important to question your memory. Some of us have better memories than others, but none of us are perfect.
Stop Gaslighting Yourself | Nir and Far
Many universities are under scrutiny for how they use government funds for research. Harvard is in the spotlight, and they are even in the top twenty.
How universities spend billions in government funds | USAFacts
Science and Academia
Basic research is essential. Without it, there is no innovation.
This Famous Physics Experiment Shows Why the Government Should Support ‘Useless’ Science | Wired
Understanding what the Colosseum looked like and how it worked makes it even more impressive
A 3D rendering of the Colosseum captures its architectural genius and symbolic power | Aeon
Almost all stories follow a common structure. Great storytellers make their tales fresh and exciting. Not-so-great storytellers sound derivative.
Here is a fascinating view of the oceans’ currents.
A stunning visualisation explores the intricate circulatory system of our oceans | Aeon
Humor
Gary Larson takes on literature. I personally like “The Portrait of Dorian Cow.”
The Best Far Side Comics Inspired By Books, Ranked | CBR
Quotes
“It’s hard to engage with people who disagree with you, but it’s an essential practice to develop.”
- Ralph Waldo Emerson
“There is nothing more dreadful than imagination without taste.”
- Johann Wolfgang von Goethe
“Often the search proves more profitable than the goal.”
- E.L. Konigsburg
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