US Loses Final Rating: The United States has lost its last triple-A credit rating from a major ratings agency after Moody’s downgraded the country’s long-term credit rating on Friday, May 16, citing rising government debt and ongoing fiscal challenges. This move deals a major setback to President Donald Trump’s economic narrative, which highlights strength and prosperity under his leadership.
Moody’s lowered the U.S. rating from Aaa to Aa1, bringing it in line with earlier downgrades by S\&P and Fitch. Moody’s explained the downgrade by pointing to “the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns.” The agency projected federal deficits to rise to nearly nine percent of GDP by 2035, up from 6.4 percent in 2023, mainly due to higher interest payments, growing entitlement costs, and stagnant revenue growth.
Moody’s forecasted the federal debt burden to increase to 134 percent of GDP by 2035, compared to 98 percent last year. The announcement coincided with the failure of Trump’s major spending bill in Congress, blocked by Republican fiscal conservatives who opposed the bill’s scope and cost. The proposal included a multi-trillion-dollar extension of the 2017 tax cuts and significant cuts to Medicaid, which currently supports over 70 million low-income Americans.
In response to the downgrade, the White House criticized Moody’s, focusing on Mark Zandi, chief economist at Moody’s Analytics. “Nobody takes his ‘analysis’ seriously. He has been proven wrong time and time again,” said White House communications director Steven Cheung on X.
Still on US Loses Final Rating
Moody’s decision reflected concerns raised in earlier downgrades. S\&P first lowered the U.S. credit rating in 2011 during President Barack Obama’s administration, citing political deadlock on debt management. Fitch followed in 2023, warning of a long-term decline in governance standards related to fiscal matters.
On May 16, Moody’s stated that successive administrations and Congress have failed to take effective action to curb growing deficits and interest obligations. The agency expressed doubt that current fiscal plans would lead to significant, long-term reductions in spending or deficits.
“America’s fiscal performance is likely to deteriorate relative to its own past and compared to other highly-rated sovereigns,” Moody’s said in its report.
Republican Congressman French Hill, chair of the House Financial Services Committee, called the downgrade “a strong reminder that our nation’s fiscal house is not in order,” reaffirming the GOP’s commitment to restoring fiscal stability and addressing structural debt issues.
Democratic Congressman Brendan Boyle, ranking member of the House Budget Committee, described the downgrade as a “direct warning” and blamed Republican policies for worsening the fiscal outlook. “The question is whether Republicans are ready to wake up to the damage they’re causing,” he stated.
Despite the downgrade, Moody’s changed the U.S. credit outlook from “negative” to “stable,” noting the country still possesses significant credit strengths, including the size and resilience of the U.S. economy and the continued dominance of the U.S. dollar as the world’s reserve currency.
Donald Trump responds to Biden’s prostate cancer diagnosis.
Would you like to Earn Money Online with just your mobile device?
If yes then click on the link below:
