Moody’s Strips U.S. of Last Perfect Credit Rating Amid Soaring Debt Concerns

The United States has lost its last perfect credit rating, as Moody’s Ratings downgraded the nation from Aaa to Aa1, citing the government’s growing debt and chronic failure to curb deficits. This move marks the end of the U.S.’s century-long hold on a top-tier rating from all three major agencies.

Why Did Moody’s Downgrade the US Credit Rating?

In its statement, Moody’s blamed decades of inaction. Successive administrations and Congress failed to reverse the trend of ballooning annual deficits and rising interest payments.

• Federal deficits are expected to widen to 9% of GDP by 2035, up from 6.4% in 2024.
• Debt is projected to reach 134% of GDP by 2035, a sharp rise from 98% last year.

Despite the downgrade, Moody’s noted the U.S. retains unique strengths — a dynamic economy and the dollar’s global reserve currency status.

Trump’s Policies in the Spotlight

Extending Donald Trump’s 2017 tax cuts is a top priority for the current administration. But Moody’s warns this could add $4 trillion to the primary deficit over the next decade.

The downgrade is a blow to Trump’s efforts to cut taxes and manage borrowing costs. His “Department of Government Efficiency” has struggled to meet savings targets. Tariff-driven revenue strategies have also raised concerns of a trade war, further straining economic stability.

Political Gridlock Makes Matters Worse

A divided Congress remains a roadblock. On Friday, a Republican-backed bill aiming to cut spending and extend tax breaks failed to pass the House Budget Committee. Hard-right Republicans demanded deeper cuts, while Democrats opposed the package altogether.

This political stalemate continues to fuel market uncertainty.

Market Reactions: Immediate Impact

The downgrade announcement, made after markets closed, has already sparked concern.

• Treasury bond yields rose as investors reacted to the news.
• Analysts predict a cautious market when trading resumes.
  

“This caught markets off guard,” said Tom di Galoma of Mischler Financial. “It’s a significant and unexpected move.”

Global Implications of the Downgrade

Moody’s was the last agency holding the U.S. at AAA status. Standard & Poor’s downgraded in 2011, followed by Fitch in 2023.

A lower rating increases borrowing costs and raises the risk of default perception. This could ripple through global markets, affecting everything from interest rates to foreign investment confidence.

Do you think the U.S. downgrade is justified, or is Moody’s overreacting to political gridlock? Share your take in the comments.

More…

• https://www.bbc.com/news/articles/c4ge0xk4ld1o 
• https://www.aljazeera.com/economy/2025/5/16/moodys-strips-us-government-of-top-credit-rating
• https://www.washingtonpost.com/business/2025/05/16/credit-rating-triple-abudget 
• https://www.overheretoronto.com/ontario-budget-2025-232-5b-war-chest-to-tackle-u-s-tariffs-and-boost-economy