In an unexpected decision that would make President Donald Trump’s attempts to lower taxes more difficult and cause a stir in international markets, Moody’s Ratings has revoked the United States government’s top credit rating, citing the inability of past administrations to curb the country’s mounting debt.
Moody’s downgraded the rating from the gold-standard Aaa to Aa1 on Friday. It shifted its view on the US from “negative” to “stable,” stating that “Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs.
However, the US “retains exceptional credit strengths such as the size, resilience, and dynamism of its economy and the role of the US dollar as global reserve currency,” the statement continued. Of the three main rating agencies, Moody’s is the latest to downgrade the credit rating of the federal government. Federal debt was downgraded by Standard & Poor’s in 2011 and by Fitch Ratings in 2023.
“We anticipate federal deficits to increase, reaching nearly 9 percent of [the US economy] by 2035, up from 6.4 percent in 2024, driven primarily by increased interest payments on debt, rising entitlement spending, and relatively low revenue generation,” Moody’s said in a statement.
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