Topline
Financial ratings firm Moody’s Ratings downgraded the U.S. government’s credit ratings Friday, citing its rising debt and interest in a move that underscores a ballooning federal budget deficit, making it the last of the big three firms to downgrade the government’s credit.
Key Facts
Moody’s Ratings downgraded the U.S. credit score from a Aaa to Aa1, lowering the designation from prime to high grade.
The firm said the one-notch downgrade “reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns.”
Moody’s, which was the final major ratings agency that gave the U.S. a triple-A credit rating, scrutinized the federal government, saying successive presidential administrations and Congress have failed to find measures to reverse annual fiscal deficits and rising interest costs.
The U.S. lost its triple-A credit rating from Fitch Ratings in 2023 and from S&P Global Ratings in 2011.
However, Moody’s also changed its outlook from negative to stable, propping up the U.S.’ “exceptional credit strengths” and the role of the dollar as the world’s reserve currency.
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Crucial Quote
“Over the next decade, we expect larger deficits as entitlement spending rises while government revenue remains broadly flat,” Moody’s said. “In turn, persistent, large fiscal deficits will drive the government’s debt and interest burden higher. The US’ fiscal performance is likely to deteriorate relative to its own past and compared to other highly-rated sovereigns.”
Key Background
The national debt is $36.2 trillion, rising nearly $26 billion since 2001. Large jumps in the debt have been attributed to the U.S.’ wars in the Middle East, the 2008 Great Recession and the COVID-19 pandemic. According to the Treasury Department, tax cuts, stimulus packages, increased government spending and lowered tax revenue “generally account for sharp rises in the national debt.”
Further Reading
Inflation Hits Lowest Level In 4 Years Despite Tariff Chaos (Forbes)
