Moody's Swings (May 22, 2025)

Welcome to Home & Away. Last week, Moody’s, the widely respected international financial ratings agency, downgraded the United States. The reasoning behind its decision was straightforward: “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.” In short, persistent and growing budget deficits will increase the nation’s debt load, which already exceeds $36 trillion, or roughly 125 percent of annual economic output.

The Moody’s decision boils down to a vote of no confidence in the ability of this administration and this Congress to responsibly manage and steward the U.S. economy. To be sure, Democrats and Republicans share a degree of responsibility for getting the country to this point, as the debt has gone up under both Republican and Democratic presidents. But the lion’s share of the responsibility falls on Republicans, who have consistently cut taxes (and, as a result, government revenues) more than they have stimulated growth or reduced spending.

Exacerbating the problem is that the Republican budget plan, which narrowly passed in the House this morning with backing from the White House and is now headed to the Senate, promises to make a bad situation worse. The proposed bill, which extends existing tax cuts and adds new ones, will increase the debt substantially each and every year, ultimately adding a good many trillions to the debt over the next decade. All this at a time when there is no justification for running a large deficit.

Contrary to the Trump administration’s assertions, revenues will not come close to offsetting annual deficits as growth will slow because of policies such as Trump’s tariffs and funding cuts to the IRS. Plus, serious spending cuts are not materializing. DOGE’s emphasis on cutting non-defense discretionary spending, even if carried out to the extreme, will barely move the needle given how small a percentage of federal spending falls under this category. Meanwhile, defense spending will be increasing, as will both overall spending on entitlements (despite cuts in Medicaid) and the cost of servicing the debt.

The result? Interest rates will go up. Economic growth will slow further. All this creates the wrong sort of self-perpetuating momentum, as higher debt leads to higher rates, which in turn leads to higher deficits and debt. As Herb Stein once pointed out, “If something cannot go on forever, it will stop.” This will one day stop—not because we will become more disciplined, but because the bond markets will make it unsustainable. No one can predict exactly when that day will come, but we do know that it is increasingly likely to arrive (quite possibly sooner rather than later if markets are to be believed) and that it will prove to be both costly and painful when it does. Democracies tend to have trouble dealing with slow-motion crises, and this is no exception.

The Other PSA

Normally the letters PSA refer to public service announcements. Not this week. Instead, the PSA on everyone’s mind is the prostate-specific antigen test, which measures a protein that can indicate prostate cancer.

As you all know by now, Joe Biden’s office announced last weekend that he was diagnosed with aggressive and advanced prostate cancer. An announcement such as this would normally elicit sympathy, and, for good reason, this one did. But it also added fuel to the fire that those around the former president were engaged in a cover-up of his physical and mental infirmities.

That doesn’t seem to be the case here. Yes, prostate cancer tends to advance slowly and can oftentimes be detected in earlier stages through a PSA and other blood tests, MRIs that display lesions, and/or biopsies. But it seems that the former president stopped taking such tests a decade ago, which is consistent with existing guidelines that largely do not encourage screening for men over 70, much less 82.

But even without the cancer, it is increasingly clear that the former president was in no shape to stand for re-election, never mind serve out a second four-year term. Those close to him—including family, friends, and senior White House staff—violated the tenth and ultimate obligation of good citizens, to put country before party or person. Much of the media also failed to fulfill its obligation to ask difficult but necessary questions at the time. Publicly acknowledging the reality that the then-president’s condition ruled out a second term and pressuring him not to stand for re-election before his disastrous debate performance would have been a true public service announcement.

Phoning Putin

The much-anticipated conversation between Presidents Trump and Putin took place Monday, and it resolved little. Actually, less than little. It underscored yet again that Putin has no interest in a ceasefire based on terms any independent Ukrainian government would accept. Putin seems mainly interested in continuing to prosecute the war, given Russia’s current advantages on the battlefield, and in avoiding blame from the Trump administration for being the party responsible for prolonging the fighting.

President Trump, for his part, seems unwilling to increase pressure on Russia and also increasingly uninterested in resolving a war that he repeatedly vowed he would end before taking office or within 24 hours of being inaugurated. He dropped his call for an immediate ceasefire, replacing it with one for direct Russia-Ukraine talks, a proposal Putin floated earlier this month but failed to follow through on after Ukrainian President Zelenskyy expressed openness to the idea. Trump now seems comfortable with the Vatican, not the United States, playing a larger diplomatic role in mediating those efforts. Whether with Russia and Ukraine, or Israel and Hamas, this president seems to lose interest in negotiations that do not succeed quickly, which few do.

What is missing, beyond staying power, is an understanding that diplomacy is mostly a reflection of context. What happens away from the table is critical to shaping behaviors at the table. In this case, the goal must be to create a context that forces Putin to conclude, however reluctantly, that continued fighting will not yield more for Russia in the way of results. This requires a clear U.S. commitment to Ukraine’s defense, including an open-ended pledge to provide it with the arms and intelligence it needs to defend itself against Russia. Additional sanctions on Russia, which Trump also now seems to be backing away from, will not do the trick in isolation, even if such sanctions are warranted.

Unfortunately, the American president doesn’t appear to appreciate he will never get the peace he seeks if he continues to show more interest in cultivating Putin than in helping Ukraine stand up to Russian aggression. What he does appear prepared to do is leave Ukraine’s fate in its own hands and those of Europe. If this proves to be the case, it would constitute a shameful chapter in this country’s history, one with sweeping, adverse ramifications for the United States and the world it has built.

The Thrill of Victory…

It was a busy week for sports. If you have not seen a tape of Saturday’s Preakness (the second leg of horseracing’s Triple Crown) do yourself a favor and watch it. It wasn’t just how the eventual winner Journalism broke through; it was the acceleration that allowed him to prevail at the very end. Truly breathtaking, as was the New York Knicks’ victory over the Boston Celtics, a win that dethroned the 2024 NBA champions and gave the Knicks a fighting chance to be their successor. I will have to leave it at that, as I am still recovering from the trauma of last night’s Knicks-Pacers game.

Which brings me to golf. Scottie Scheffler proved why he is the world’s best golfer, winning the year’s second major, the PGA Championship, even though he didn’t bring his “A” game to Quail Hollow. I’ve come to think that what distinguishes the best athletes is not just that they win when they are at their best but that they manage to grind out wins when something is off.

…And the Agony of Defeat

It would be just as accurate to say that others lost as much as Scheffler won. At the top of this list would be Jon Rahm. Rahm, who hails from Spain and plays on the Saudi-backed LIV tour, was, at one point on the back nine on Sunday, tied with Scheffler for the lead. Which is when the wheels came off. He missed two makeable birdie putts (but not gimmes!) before going five over par over the final three holes—including hitting two shots into the water. By day’s end, Rahm had fallen to a tie for 8th place, costing him a good deal of money (something he gets in abundance from being on the LIV tour) and a PGA title to complement his previous U.S. Open and Masters victories.

I mention all this as a lead-in to his post-round press conference, which Rahm handled with considerable grace and class. After admitting that nerves played a role in his demise, he went on to say, "I always like to go back a little bit on something that Charles Barkley likes to remind basketball players all the time. I play golf for a living. It's incredible. Am I embarrassed a little bit about how I finished today? Yeah. But I just need to get over it, get over myself. It's not the end of the world. It's not like I'm a doctor or a first responder, somebody who if they have a bad day, truly bad things happen. I'll get over it. I'll move on. It's a lot more positive than negative to think about this week.” Parents and coaches, please take note.

A Final Word

As you may have noticed, Home & Away deviated from its normal schedule and came out on Thursday this week, as I expect some of you plan to get a head start on the long weekend. I may make this the new normal in the weeks ahead. If so, I will let you know. For now, have a good few days off but also have a meaningful Memorial Day. There is much to contemplate.

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Richard Haass in the news

Sunday, May 18: Fareed Zakaria, GPS (“Trump’s Shock Move to Lift Syria Sanctions” and “Trump’s New Middle East Doctrine”)

Monday, May 19: The Situation Room (“There's a Chance Putin's Overplaying His Hand" : Richard Haass on the High-Stakes Phone Calls to End the War in Ukraine”)

Monday, May 19: The Claman Countdown (“Putin Has a Set of Demands”)

Check out The Bill of Obligations: The Ten Habits of Good Citizens