Moody's Downgrades US Credit Rating
Moody's reduces the credit rating of the United States from Aaa to Aa1, citing unsustainable government debt growth.
Moody's Investors Service has downgraded the credit rating of the United States from the highest Aaa level to Aa1, attributing the decision to the failure of the government to control rising public debt.
Despite the downgrade, Moody's emphasized that the United States maintains 'exceptional credit strength,' citing factors such as the size, resilience, and dynamism of its economy, as well as the role of the US dollar as the world's primary reserve currency.
This marks Moody's as the last of the three major credit rating agencies to lower the rating of the federal government.
Standard & Poor's first downgraded the federal debt in 2011, followed by Fitch in 2023.
Moody's projection indicates that federal deficits are expected to increase, potentially reaching nearly nine percent of GDP by 2035, up from 6.4 percent in 2024. This increase is primarily driven by higher interest payments on the debt, rising government spending, and relatively low revenue generation.
The agency noted that the extension of the tax cuts implemented in 2017 by President Donald Trump—a priority for the current Republican-controlled Congress—could add $4 trillion to the primary federal deficit over the next decade, excluding interest payments.
The ongoing political stalemate in the U.S. has not addressed the significant federal deficits, as Republicans consistently reject tax increases while Democrats are unwilling to reduce expenditure.
Recently, Republicans in the House of Representatives failed to advance a substantial tax relief and spending cut package through the Budget Committee.
A small group of far-right Republican lawmakers, advocating for deeper cuts to Medicaid and tax incentives for green energy initiatives introduced by former President Joe Biden, aligned with all Democrats in opposing the proposal.
Despite the downgrade, Moody's emphasized that the United States maintains 'exceptional credit strength,' citing factors such as the size, resilience, and dynamism of its economy, as well as the role of the US dollar as the world's primary reserve currency.
This marks Moody's as the last of the three major credit rating agencies to lower the rating of the federal government.
Standard & Poor's first downgraded the federal debt in 2011, followed by Fitch in 2023.
Moody's projection indicates that federal deficits are expected to increase, potentially reaching nearly nine percent of GDP by 2035, up from 6.4 percent in 2024. This increase is primarily driven by higher interest payments on the debt, rising government spending, and relatively low revenue generation.
The agency noted that the extension of the tax cuts implemented in 2017 by President Donald Trump—a priority for the current Republican-controlled Congress—could add $4 trillion to the primary federal deficit over the next decade, excluding interest payments.
The ongoing political stalemate in the U.S. has not addressed the significant federal deficits, as Republicans consistently reject tax increases while Democrats are unwilling to reduce expenditure.
Recently, Republicans in the House of Representatives failed to advance a substantial tax relief and spending cut package through the Budget Committee.
A small group of far-right Republican lawmakers, advocating for deeper cuts to Medicaid and tax incentives for green energy initiatives introduced by former President Joe Biden, aligned with all Democrats in opposing the proposal.
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