Trump’s tax bill blocked by House Republicans as Moody’s strips US of AAA rating

Hard-right Republicans in Congress killed Trump’s long-promised tax overhaul on Friday, the same day Moody’s pulled the US government’s last AAA credit rating, slamming Washington for its runaway debt and refusal to cut spending.

The rejection of the bill by five Republicans on the House Budget Committee came just hours before Moody’s downgraded the federal government, warning that US debt could hit 134% of GDP by 2035.

The bill, backed aggressively by Trump , was meant to extend his 2017 tax cuts and add new breaks, like scrapping taxes on tips and overtime pay, boosting defense spending, and throwing more money at immigration enforcement.

But conservatives said it didn’t go far enough. They wanted sharper spending cuts, especially to Medicaid and clean energy incentives. The revolt caught Trump flat-footed. He had told Republicans online to “UNITE behind” the bill, warning, “We don’t need ‘GRANDSTANDERS’ in the Republican Party.”

Budget panel blocks bill despite White House pressure

The bill failed after Ralph Norman, Chip Roy, Andrew Clyde, Josh Brecheen, and Lloyd Smucker broke ranks and voted no, joining all 16 Democrats on the committee. The five Republicans, most of them tied to the House Freedom Caucus, dug in.

Roy told the committee:

“We are writing checks we cannot cash and our children are going to pay the price. So, I am a ‘no’ on this bill unless serious reforms are made.”

Norman pushed back on Trump’s attack, saying, “This isn’t a grandstand. We’ll compromise somewhere, but just not giving the farm.” Smucker flipped from a “yes” to a “no,” calling it a procedural move to allow the measure to come up again once changes are made.

They want deeper Medicaid cuts, repeal of Democrat-passed green energy credits, and for the Medicaid work requirements to start right away, not in 2029.

Despite the loss, Jodey Arrington, the Texas Republican who chairs the committee, scheduled a rare Sunday night session to try again. He said the bill reflects the promise Republicans made when Trump was elected president and they retook Congress last November. “I am confident we will get to a good place this weekend and have the votes to pass it out of Committee Sunday evening,” Arrington said in a statement.

Moody’s slams US debt path, removes final AAA rating

As Congress fought over the bill, Moody’s released a scathing downgrade report, saying the US has failed to tackle its massive $36.2 trillion debt. Moody’s had been the last of the three major agencies still giving the US a AAA rating. That ended Friday.

The agency projected US debt could balloon to 134% of GDP by 2035, up from 98% now. The report stated, “Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs.” They also said the plans on the table—including Trump’s bill—lacked real spending cuts.

Moody’s warned that America’s fiscal situation is now weaker than other developed countries. The downgrade adds pressure on the government, especially as the Republican-controlled House struggles to agree on budget reform.

The fiscal fight is no longer about just tax policy—it’s now about the entire credibility of the US government’s ability to manage money.

Healthcare cuts, silencer tax repeal add fuel to the fight

Trump’s tax bill also included a grab bag of conservative goodies, including scrapping the tax on firearm silencers, and a full extension of the 2017 tax cuts, which nonpartisan analysts say would add at least $3.72 trillion to the deficit over ten years.

In a May 16 letter, the Congressional Budget Office confirmed the proposal would stay under the $4.5 trillion cap imposed by the Budget Committee. Trump’s team has pushed the working-class angle hard, saying removing taxes on tips and overtime will help regular Americans. But Democrats and budget hawks say the real winners are at the top.

Brendan Boyle, the committee’s top Democrat, warned that Republican-backed spending cuts could cause 8.6 million people to lose health coverage. “No other previous bill, no other previous law, no other previous event caused so many millions of Americans to lose their healthcare. Not even the Great Depression,” Boyle said.

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