Moody’s has downgraded the United States’ credit rating from Aaa to Aa1, citing rising debt, interest costs, and political inaction, marking the end of America’s perfect status among major agencies.
At a Glance
- Moody’s downgraded the U.S. from Aaa to Aa1 on May 16
- Rising federal debt and interest payments fueled the decision
- Moody’s cited failure of successive administrations to curb deficits
- The downgrade ends America’s last top-tier credit rating among major agencies
- Despite the drop, the U.S. retains a stable economic outlook
Debt and Division Cost U.S. Its Prestige
The United States no longer holds a perfect credit rating after Moody’s officially downgraded its long-term rating from Aaa to Aa1. This move makes Moody’s the last of the “Big Three” credit agencies—after Fitch and S&P—to cut America from its top financial pedestal.
Moody’s cited an alarming rise in national debt and mounting interest payments that have reached levels “significantly higher than similarly rated sovereigns.” Analysts also faulted a political system increasingly unwilling or unable to reverse the deficit trend. “Successive U.S. administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits,” the agency wrote.
Watch a report: What to Make of Moody’s Downgrading US’ Credit Rating.
With debt projected to balloon from 100% to 118% of GDP by 2035 and federal deficits forecast to rise from 6.4% to 9% of GDP, Moody’s concluded the U.S. lacks a credible strategy for long-term fiscal sustainability.
Political Finger-Pointing and Economic Fallout
The downgrade has triggered immediate political backlash. The Biden administration blamed COVID-era stimulus and inflationary pressures inherited from past crises. “Even Obama economists warned the Biden administration and congressional Democrats against recklessly wasting trillions,” said spokesperson Kush Desai. But critics argue these problems long predate the pandemic.
At the same time, Republican lawmakers rejected efforts to extend Trump-era tax cuts, highlighting the fractured fiscal landscape and the broader dysfunction Moody’s criticized. Despite the downgrade, the agency emphasized the U.S. still benefits from “a large, resilient economy” and the global dominance of the U.S. dollar.
Economists say the downgrade could raise borrowing costs slightly and intensify scrutiny on U.S. debt policies—but it may also force long-overdue conversations about fiscal reform.
Market Resilience Meets Fiscal Reality
Though Moody’s outlook for the U.S. remains stable, the downgrade delivers a symbolic blow to the nation’s economic prestige. It’s a stark reminder that no country, even the largest economy on Earth, is immune from the consequences of unchecked borrowing and legislative inertia.
The Federal Reserve’s independence continues to provide a stabilizing force, allowing it to steer monetary policy even as fiscal policy wavers. Still, as interest payments grow and entitlement spending balloons, pressure will mount on lawmakers to address the spiraling costs.
Unless Congress and the White House can forge a bipartisan path toward deficit reduction, this downgrade may be just a warning shot before deeper economic consequences set in.
