Republicans Block Trump’s Tax Bill Amid Spending Concerns, Moody’s Downgrades U.S. Credit Rating

By  Political and Economic Correspondent
May 17, 2025

Washington, D.C. – A tumultuous day in U.S. politics saw hardline Republicans in the House of Representatives derail President Donald Trump’s flagship tax legislation, the “One Big Beautiful Bill Act,” over insufficient spending cuts, just hours before Moody’s Ratings stripped the United States of its last AAA credit rating. The downgrade, announced on Friday, May 16, 2025, citing a ballooning $36.2 trillion national debt and persistent fiscal deficits, sent shockwaves through financial markets and amplified concerns about America’s economic stability. The convergence of these events has sparked a surge in web traffic as Americans seek answers about the implications for taxes, government spending, and the economy.

A Legislative Stumble: Republicans Reject Trump’s Bill

The House Budget Committee’s 16-21 vote against advancing the 1,116-page tax bill marked a rare setback for Trump, who has prioritized extending his 2017 Tax Cuts and Jobs Act (TCJA) and adding new tax breaks, including a $4,000 deduction for seniors. Five conservative Republicans—Reps. Chip Roy (R-Texas), Ralph Norman (R-S.C.), Andrew Clyde (R-Ga.), Josh Brecheen (R-Okla.), and Lloyd Smucker (R-Pa.)—joined Democrats to block the measure, demanding deeper cuts to Medicaid, Biden-era green energy tax credits, and faster implementation of work requirements for social programs.

The bill, which Trump pushed for passage by Memorial Day, includes permanent extensions of the 2017 tax cuts, temporary exemptions for tips, overtime pay, and auto loan interest, and an increased child tax credit to $2,500. It also proposes $350 billion for border security and mass deportations, alongside authority for the Treasury Secretary to revoke tax-exempt status from “terrorist-supporting” nonprofits. Nonpartisan analysts, including the Congressional Budget Office, estimate the bill would add $3.72 trillion to the federal deficit over a decade, a sticking point for fiscal hawks.

Rep. Roy criticized the bill’s delayed reforms, noting that Medicaid work requirements are not effective until 2029, beyond Trump’s term. Meanwhile, Republicans from high-tax states like New York pushed for a higher state and local tax (SALT) deduction cap, proposing $62,000 for single filers versus the bill’s $30,000 for joint filers up to $400,000 in income. House Speaker Mike Johnson (R-La.), facing a slim GOP majority, can afford only two defections, making negotiations critical for a Sunday, May 18, revote.

Trump took to Truth Social, urging unity: “We don’t need ‘GRANDSTANDERS’ in the Republican Party. STOP TALKING, AND GET IT DONE!” White House spokesperson Kush Desai defended the bill, stating, “The Trump administration and Republicans are focused on fixing Biden’s mess by slashing waste, fraud, and abuse in government.”

Moody’s Downgrade: A Fiscal Wake-Up Call

Hours after the bill’s defeat, Moody’s downgraded the U.S. credit rating from Aaa to Aa1, ending a century-long run as the last major agency to maintain a triple-A rating for U.S. debt, following Fitch (2023) and S&P (2011). The agency cited “successive U.S. administrations and Congress” failing to curb deficits, projecting a federal debt burden of 134% of GDP by 2035, up from 98% in 2024, driven by rising interest payments, entitlement spending (Social Security and Medicare), and low revenue generation.

Moody’s expects deficits to widen to 9% of GDP by 2035 from 6.4% in 2024, with the TCJA’s extension adding $4 trillion to the primary deficit over a decade. The downgrade, while assigning a “stable” outlook due to the U.S. dollar’s reserve currency status and an independent Federal Reserve, warns of higher borrowing costs. Treasury yields rose post-announcement, with analysts like Stanford’s Darrell Duffie noting, “It adds to the evidence that the United States has too much debt.”

The White House pushed back, with spokesperson Steven Cheung attacking Moody’s economist Mark Zandi as a “Never Trumper” and former Obama advisor, claiming, “Nobody takes his ‘analysis’ seriously.” Former Trump economic advisor Stephen Moore called the downgrade “outrageous,” arguing U.S. bonds remain a gold standard. Senate Minority Leader Chuck Schumer (D-N.Y.) seized on the downgrade, stating, “This should be a wake-up call to Trump and Congressional Republicans to end their reckless pursuit of their deficit-busting tax giveaway.”

Web Traffic Surge: Americans Seek Clarity

The dual shocks of the bill’s failure and Moody’s downgrade drove a spike in online searches and discussions. Google Trends reported a 300% increase in queries for “Trump tax bill,” “U.S. credit rating downgrade,” and “national debt” on May 16–17, 2025. News sites like Reuters, CNN, and Fox Business saw traffic surges, with Reuters’ article on the downgrade garnering over 2 million views within hours. Social media platforms, particularly X, exploded with reactions, with hashtags like #TrumpTaxBill and #MoodyDowngrade trending. Posts like @cwebbonline’s highlighted the irony of Republicans pushing deficit-adding tax cuts while @robertwolf32 mocked GOP fiscal conservatism.

The public’s interest reflects anxiety over economic impacts. A higher debt burden could raise interest rates, increasing costs for mortgages (averaging 6.7% in 2025, per Freddie Mac) and consumer loans. The Committee for a Responsible Federal Budget drew parallels to the 2022 UK crisis under Liz Truss, warning of a potential “Truss Moment” for the U.S. if fiscal irresponsibility persists.

Economic and Political Implications

The downgrade could ripple through markets, with long-dated Treasury yields potentially climbing, as noted by Tolou Capital’s Spencer Hakimian. This raises borrowing costs for both government and private sectors, squeezing households already grappling with 2.5% inflation and Trump’s proposed tariffs, which sparked trade war fears. The U.S. faces a debt ceiling deadline by summer 2025, and repeated brinkmanship—evidenced by 2023’s near-default—further erodes investor confidence.

Politically, the bill’s failure exposes GOP fractures. Hardline conservatives demand austerity, while moderates like Sen. Josh Hawley (R-Mo.) warn against cuts to Medicaid, which covers 1 in 5 Americans at a $618 billion cost. Democrats, unified in opposition, criticize the bill as favoring the wealthy, with Rep. Brendan Boyle (D-Pa.) warning of healthcare losses. The Senate, where reconciliation could bypass a filibuster, remains a hurdle, with moderates like Sen. Bill Cassidy (R-La.) expressing caution.

What’s Next?

The House Budget Committee will reconvene on May 18 to negotiate compromises, potentially increasing SALT caps or accelerating spending cuts. Failure to pass risks delaying Trump’s agenda, including senior relief like the $4,000 deduction, which could save retirees $1,200 annually for a $60,000 income household. The downgrade, while not immediately catastrophic due to the dollar’s global role, signals long-term fiscal challenges. Moody’s suggests raising revenue or cutting spending—options neither party fully embraces.

For Americans, the stakes are high. The bill’s tax cuts could boost take-home pay but exacerbate deficits, while the downgrade threatens higher costs. Web traffic will likely remain elevated as citizens monitor developments, with trusted sources like Reuters, POLITICO, and CBS News offering updates. As Boston College’s Brian Bethune noted, “They have got to come up with a credible budget agreement that puts the deficit on a downward trajectory.”

For ongoing coverage, visit Reuters.com, CBSNews.com, or follow @Reuters on X.