### Growing Concerns as America's National Debt Surpasses $36.2 Trillion

America’s escalating national debt, now exceeding a staggering $36.2 trillion, has alarmed economists and credit agencies alike. Recently, Moody’s downgraded the U.S. credit rating amid apprehensions that the country's economic growth may fail to keep pace with its increasing debt and interest burden.

Economists have criticized the political strategies aimed at curbing the national debt, deeming them inadequate and delayed. Analysts warn that the situation is worsening, causing a noticeable erosion of confidence in the United States' fiscal stability. The downgrade from Aaa to Aa1 by Moody's has signaled that America's economic and financial strengths no longer fully offset its declining fiscal metrics.

Treasury Secretary Scott Bessent has attempted to downplay the downgrade's significance, urging the market to disregard Moody's assessment. However, Deutsche Bank's Jim Reid highlighted the continuous influx of negative fiscal news, describing the current state as "death by a thousand cuts."

Despite being aware of the debt crisis, President Trump and his administration advocate a strategy centered around efficiency and cost-cutting. Trump has proposed using funds from his 'gold card' visa scheme to pay off the debt, while stressing tax reduction measures. The administration is pushing Congress to pass an expanded version of the 2017 tax cuts, which are set to expire in 2025, including proposed removals of taxes on tips and overtime pay.

The Trump administration argues that these tax cuts will boost the GDP, thereby rebalancing the debt-to-GDP ratio. They estimate that the tax cuts could elevate the short-run real GDP by 3.3 to 3.8% and the long-run real GDP by 2.6 to 3.2%. Conversely, the Congressional Budget Office (CBO) has voiced its skepticism. Their April report projected that extending the 2017 tax provisions, without other fiscal policy changes, could inflate public debt to 220% of GDP by 2025.

In the face of potential confidence loss among U.S. debt buyers, the Federal Reserve might resort to quantitative easing to manage longer-term interest rates and facilitate ongoing borrowing. While the bond market's initial reaction to Moody’s downgrade was muted, UBS's Chief Investment Officer, Mark Haefele, suggested that the Federal Reserve could intervene if volatility spikes, minimizing potential market disruptions.

In summary, while pessimism about America's fiscal health grows, the administration remains committed to its tax reduction strategy, promoting it as a means to drive economic growth and manage the national debt. However, the contrasting views among economists, credit agencies, and fiscal policy analysts underscore a complex and unfolding challenge.