US Faces ‘Death By A Thousand Cuts’ As National Debt Tops $36 Trillion, Cautions Deutsche Bank: '...The Drip, Drip, Drip Of Poor Fiscal News Building Up...' - Invesco QQQ Trust, Series 1 (NASDAQ:QQQ), SPDR S&P 500 (ARCA:SPY)

The U.S. economy is facing a potential crisis as the national debt continues to rise, sparking concerns among economists and analysts.

What Happened: Deutsche Bank’s Jim Reid expressed his concerns about the U.S. fiscal situation. He described it as experiencing a “death by a thousand cuts,” indicating the gradual erosion of confidence in the country’s fiscal future, reported Fortune.

Reid’s comments came in response to the U.S. losing its final triple-A rating late on Friday, a step he believes will further add to the mounting fiscal troubles, putting more pressure on the fragile debt sustainability threshold.

About the Moody’s downgrade, Reid stated, “…keeps the drip, drip, drip of poor fiscal news building up against the debt sustainability dam in the background."

The U.S. national debt, currently exceeding $36.2 trillion, is becoming a growing concern for economists. They worry that as both the debt and the interest payments required to service it continue to rise, the economy might not grow quickly enough to support such levels of spending.

Why It Matters: Moody’s recent downgrade of the U.S. credit rating from Aaa to Aa1 reflects this concern. The agency explained the decision by noting that the country's considerable economic and financial strengths no longer sufficiently offset the deterioration in its fiscal indicators.

The downgrade by Moody’s follows similar moves by Fitch and S&P Global, marking the loss of the U.S. top-tier ‘triple-A’ rating from all three major credit agencies. This has led to a mixed response from experts.

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Treasury Secretary Scott Bessent dismissed concerns over the U.S. government debt, attributing the current fiscal state to the Biden administration’s spending over the past four years. Meanwhile, Ray Dalio, founder of Bridgewater Associates, warned that the downgrade grossly understates the true risk of owning U.S. debt. On the other hand, Tom Lee of Fundstrat brushed off the downgrade as a “non-event” and encouraged investors to buy stocks.

The downgrade and the growing national debt are likely to have significant implications for the U.S. economy and its global standing. The government’s response to this crisis will be crucial in determining the country’s fiscal future.

President Donald Trump and his cabinet acknowledge the national debt issue, with Trump proposing that it could be addressed using proceeds from his ‘gold card’ visa initiative. At the same time, the Department of Government Efficiency (DOGE) is prioritizing cost-cutting and improving operational efficiency.

Meanwhile, Wall Street may be less reactive to credit downgrades after previous false alarms, especially given strong tech earnings, steady consumer spending and easing inflation—all of which offer investors reasons to stay optimistic.

SPDR S&P 500 ETF Trust SPY fell 0.23%, while Invesco QQQ Trust, Series 1QQQ dropped 0.24% after the Moody’s downgrade.