Moody's Ratings stripped the US government of its top credit rating on Friday, citing successive governments' failure to stop a rising tide of debt. Moody's lowered the rating from a gold-standard Aaa to Aa1 but said the United States "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.'' Moody's is the last of the three major rating agencies to lower the federal government's credit. Standard & Poor's downgraded federal debt in 2011, and Fitch Ratings followed in 2023.
In a statement, Moody's said, "We expect federal deficits to widen, reaching nearly 9% of [the US economy] by 2035, up from 6.4% in 2024, driven mainly by increased interest payments on debt, rising entitlement spending, and relatively low revenue generation.'' Extending President Trump's 2017 tax cuts, a priority of the Republican-controlled Congress, Moody's said, would add $4 trillion over the next decade to the federal primary deficit, which doesn't include interest payments.
A gridlocked political system has been unable to tackle America's huge deficits. Republicans reject tax increases, and Democrats are reluctant to cut spending. On Friday, House Republicans failed to push a big package of tax breaks and spending cuts through the Budget Committee. A small group of hard-right Republican lawmakers, insisting on steeper cuts to Medicaid and President Biden's green energy tax breaks, joined all Democrats in opposing it. (More Moody's stories.)
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