The US government lost its perfect credit rating
Image: Asharq Al-Awsat
The US government can no longer quote the Remember the Titans âuntil now, this team has been perfectâ speech in meetings with lenders.
Moodyâs on Friday downgraded the US sovereign credit rating from the highest possible markâa rubber stamp that had been in place since 1917âciting concerns about America's growing ~$36 trillion national debt and the associated interest costs, which are projected to become the single biggest line item in the federal budget by 2051.
- The move, which demotes US creditworthiness by one notch to Aa1, strips the government of its last remaining perfect AAA credit rating from a major firm.
- Fitch Ratings made a similar downgrade to US credit in 2023, while S&P Global Ratings did so back in 2011.
Borrow now, pay later
Moodyâs says its downgrade reflects how US government debt and interest payment ratios have increased over the past decade-plus to reach âsignificantly higherâ levels compared with similarly rated nations.
Moody's also notes that the fiscal proposals currently under consideration by the US government are unlikely to lead to a sustained, multi-year reduction in deficits.
- The firm estimates US federal deficits will widen to ~9% of GDP by 2035, up from 6.4% in 2024, driven mainly by increased interest payments on debt, rising entitlement spending, and relatively low revenue generation.
ButâŚThere is a positive element: Moodyâs shifted its outlook on US debt from negative to stable, noting that America âretains exceptional credit strength such as the size, resilience and dynamism of its economy and the role of the U.S. dollar as global reserve currency.â
Looking ahead: Analysts say Moodyâs credit downgrade could result in higher borrowing costs for the US government over the long-term. However, more than a dozen statesâfrom Florida to North Carolina to Texasâwill likely hold onto their AAA scores from Moodyâs, largely because theyâre in better fiscal shape than the federal government, per Bloomberg.
đFlash poll: How do you feel about Moodyâs decision to downgrade Americaâs credit rating by one notch from perfect AAA status?
- Itâs a sign of trouble ahead
- Itâs late to the party (where Fitch and S&P Global are already in attendance)
- Itâs not really a big deal
- Unsure/other
See a 360° view of what pundits are saying â
Sprinkles from the Left
- Some commentators argue that while Moodyâs action says next to nothing about US creditworthiness, it does underscore Americaâs increasingly complacent attitude toward rising debt and trillion-dollar budget deficits.
- Others contend that Moodyâs downgrade means US debt is no longer the gold standardâthough Americaâs unique position as the worldâs reserve-currency issuer still affords it the privilege of borrowing cheaply.
- âMoodyâs Tells Us What We Already Know About US Debtâ âRobert Burgess, Bloomberg
- âAmericaâs credit rating slip: How serious?â âMint Newspaper Editorial Board
- âWhat a Moodyâs downgrade really meansâ âBaltimore Sun Editorial Board
Sprinkles from the Right
- Some commentators argue that insisting that high debt is a virtual free lunch, as most progressives and some conservatives do, ignores that ultralow interest rates will eventually rise, and also ignores how a reasonable debt level can allow space for borrowing when returns are high.
- Others contend that the US governmentâs current path to financial insolvency must be reversed by Congress and the Trump admin, rather than their current plans which ignore the real dangerâa hair more than $36 trillion in debt and soaring.
- âThe Tax Bill and the Coming Debt Crisisâ âKenneth Rogoff, WSJ
- ââBig, beautifulâ bill battle ignores the real issue: crippling US debtâ âNY Post Editorial Board
- âTrump has slowed national debt growth by 92%â âTiana Lowe Descher, Washington Examiner
Share this!
Recent Discussion stories
Discussion
  | May 16, 2025SCOTUS considers district judgesâ power to limit presidential policies
âď¸ The Supreme Court heard arguments yesterday in a case seeking to limit the ability of federal district judges to issue nationwide injunctionsâor orders that block presidential policies from taking effect across the US while courts hash out whether theyâre legal.
Discussion
  | May 14, 2025Trumpâs new Air Force One is a free luxury plane from Qatar
đ President Trumpâs decision to accept a ~$400 million luxury plane from the Qatari government has raised concernsâa debate that comes as Trump officially embarked on a trip to the Middle East to sign economic deals.
Discussion
  | May 12, 2025India and Pakistan agree to a US-brokered ceasefire
đ On Saturday, India and Pakistan agreed to a full and immediate ceasefire to end recent fighting in the Kashmir region, which marked the most serious conflict between the two nuclear powers in decades.
You've made it this far...
Let's make our relationship official, no đ or elaborate proposal required. Learn and stay entertained, for free.đ
All of our news is 100% free and you can unsubscribe anytime; the quiz takes ~10 seconds to complete