Moody's recently downgraded the United States' credit rating from Aaa to Aa1, citing concerns over rising national debt and the government's management capabilities.

In response to this downgrade, the Republican Party has introduced a tax cut proposal exceeding $5 trillion.

Dubbed the 'One Big Beautiful Bill Act,' this extensive 1,116-page legislative package aims to implement significant fiscal changes, including making the 2017 individual tax reductions permanent.

The bill features temporary tax exemptions on tips, overtime, and interest on certain auto loans until the end of 2028, alongside an increased standard deduction and an enhanced child tax credit.

To offset revenue losses from the tax cuts, the proposal includes restructuring student loans for an estimated $330 billion in savings and accelerates the elimination of clean energy tax credits.

Moreover, the plan proposes nearly $800 billion in cuts to Medicaid and reductions to the SNAP food assistance program, which Democrats warn could result in millions losing coverage.

House Speaker Mike Johnson emphasizes that the bill's success in addressing Moody's concerns hinges on its proposed historic spending cuts, rather than the tax cuts alone.

Johnson believes that the legislation will positively influence future credit evaluations by altering the economic trajectory of the U.S. and conveying a message of stability.

This recent downgrade by Moody's follows similar actions by Standard & Poor's and Fitch Ratings, which downgraded the federal credit rating in 2011 and 2023, respectively.

Additional provisions in the proposal include increased access to public lands for resource extraction, royalty cuts, and a proposed increase in the tax on university endowments to 21%.