WASHINGTON, D.C.: Moody’s Ratings has lowered the United States’ credit rating from AAA to AA1, citing ballooning federal debt and ongoing failures by successive administrations to rein in persistent fiscal deficits.
This downgrade, announced late Friday after markets closed, completes a trio of blows from major credit rating agencies—following S&P’s downgrade in 2011 and Fitch’s in 2023. The move sparked immediate concern, sending U.S. Treasury yields higher and stoking fears of bond market instability when trading resumes on Monday.
Moody’s cautioned that U.S. federal debt could surge to 134% of GDP by 2035, a steep rise from 98% in 2024. The agency also flagged the potential renewal of the 2017 tax cuts—one of President Donald Trump’s top economic priorities—as a major risk, estimating they could add $4 trillion to the national deficit over the next decade.
The downgrade came just hours after House Republicans blocked Trump’s new tax reform proposal, exposing deep internal divisions over how to offset the revenue loss. Hardline conservatives demanded sharper spending cuts, particularly targeting Medicaid and climate-related tax incentives, delaying efforts to eliminate taxes on tips, overtime pay, and firearm silencers.
The proposed legislation also sought increased funding for defense and border security.
Despite the setback, House Budget Committee Chairman Jodey Arrington pledged to bring the bill back during a rare Sunday session, expressing optimism about reaching a compromise.
Critics, however, warned that the proposed spending cuts could leave millions without access to essential healthcare services.
White House Communications Director Steven Cheung dismissed Moody’s decision, accusing the agency’s lead economist, Mark Zandi, of political bias.
Meanwhile, economic experts and analysts cautioned that the downgrade could have far-reaching global implications, undermining confidence in U.S. fiscal policy and creating turbulence in international markets.
The development highlights the growing political gridlock in Washington and the mounting fiscal strain, posing a significant challenge to Trump’s vow to balance the federal budget as the national debt climbs past $36.2 trillion.
