U.S. debt no longer earns a top grade at any of the major credit rating agencies after Moody’s downgrade
From Yahoo Finance: 2025-05-16 17:47:00
Moody’s downgraded the U.S. credit rating to Aa1 from AAA due to the increase in government debt and interest payment ratios. The downgrade comes as Congress tries to extend tax cuts and add new ones, potentially adding trillions to the budget deficit in the coming years.
The U.S. budget deficit has surpassed $1 trillion this fiscal year and is expected to widen. Debt interest payments are now a major expense, exceeding the Pentagon’s budget. Moody’s predicts deficits to rise to nearly 9% of GDP by 2035, with U.S. debt reaching 134% of GDP.
Despite the lower rating, Moody’s sees the U.S. outlook as stable, highlighting its strong economy and the role of the dollar as a reserve currency. However, the “exorbitant privilege” can no longer offset the growing debt burden. The White House blames spending, debt, and inflation-fueled Fed rate hikes for the downgrade.
Moody’s was the last major rating agency to give U.S. debt a top mark, with Fitch and S&P downgrading earlier. Moody’s remains hopeful about America’s institutions and policymaking ability, despite the downgrade. The story was originally featured on Fortune.com.