The US was stripped of its last top credit rating by Moody’s Ratings, reflecting deepening concern that ballooning debt and deficits will damage America’s standing as the preeminent destination for global capital and increase the government’s borrowing costs. Moody’s lowered the US credit score to Aa1 from Aaa on Friday, joining Fitch Ratings and S&P Global Ratings in grading the world’s biggest economy below the top, triple-A position. The one-notch cut comes more than a year after Moody’s changed its outlook on the US rating to negative. The credit assessor now has a stable outlook.
“While we recognize the US’ significant economic and financial strengths, we believe these no longer fully counterbalance the decline in fiscal metrics,” Moody’s wrote in a statement.
Moody’s blamed successive administrations and Congress for swelling budget deficits that it said show little sign of abating. On Friday lawmakers in Washington continued to work towards a massive tax-and-spending bill that’s expected to add trillions to the federal debt over the coming years.
US Debt Burden Heads Toward Uncharted Territory
Note: The latest CBO projections don’t incorporate an extension, or expansion, of the 2017 tax-cut package. Forecasts measure debt held by the public at year-end.
The White House on Friday cast the move as a political decision. Steven Cheung, a spokesman for President Donald Trump, singled out Mark Zandi, an economist for Moody’s Analytics, in a post on X, accusing him of being a long-time critic of the administration’s policies. Joseph Lavorgna who worked at the White House National Economic Council in the first Trump administration, said the timing of the downgrade is “very strange,” given that Congress is in the midst of working that major bill. The 100% debt-to-GDP ratio is also “not unusual” in the world, said Lavorgna, who’s now SMBC Nikko Securities chief US economist.
The US is the fastest-growing industrialized nation and has the best productivity per capita, so the downgrade doesn’t make sense, he said.