The United States has lost its last top-tier credit rating after Moody’s Investors Service downgraded the nation’s long-term debt from Aaa to Aa1 on Friday. The move follows years of rising federal deficits and interest payments, and places Moody’s in alignment with the two other major credit rating agencies, Fitch and S&P Global, which downgraded U.S. debt in previous years.
Moody’s cited the growing federal debt burden, projected increases in interest costs, and the absence of long-term fiscal solutions as key reasons behind the decision. According to the agency, neither past nor current administrations have made measurable progress in reversing the trajectory of annual budget shortfalls.
The downgrade comes at a delicate moment for President Donald Trump, whose administration is facing challenges in implementing spending cuts and tax reforms amid resistance in Congress. A bill to extend the 2017 tax cuts, a central part of Trump’s economic agenda, failed to advance on Friday after conservative lawmakers demanded deeper spending reductions.
“This downgrade reflects more than a decade of growing debt and rising borrowing costs that have not been matched by policy responses,” Moody’s analysts said in a statement. “We do not expect current fiscal proposals to lead to a sustained reduction in deficits.”
Estimates from Moody’s project that the federal debt will reach 134% of gross domestic product by 2035, compared to 98% in 2024. Interest payments alone could consume nearly 30% of government revenue by that time, up from 18% today. The agency also warned that mandatory spending—such as entitlement programs and debt service—is expected to rise to nearly 80% of total federal expenditures over the next decade.
Though Moody’s revised the rating downward, it assigned a “stable” outlook for U.S. debt going forward, citing the country’s economic size, resilience, and the continued global role of the U.S. dollar. The agency stated that the downgrade does not reflect a crisis but rather a gradual deterioration in fiscal conditions.
Reactions to the move were swift and divided. Former Trump economic advisor Stephen Moore called the downgrade “outrageous,” suggesting that U.S. debt remains among the most secure investments in the world. Meanwhile, the White House issued a statement criticizing Moody’s, questioning the credibility of its analysts, and placing blame on the previous administration for the fiscal situation.
Trump’s Treasury Secretary, Scott Bessent, has repeatedly asserted that the administration aims to bring down government funding costs and balance the budget. However, initiatives to achieve those goals—such as tariffs to raise revenue and spending cuts through a newly created Department of Government Efficiency—have not met expectations.
Some economists say the downgrade could put upward pressure on interest rates, leading to higher borrowing costs for the government and private sector alike. Yields on long-term U.S. Treasury bonds rose slightly in after-hours trading following the announcement, and market analysts expect further shifts when financial markets reopen on Monday.
“This downgrade reflects that the U.S. debt load is now at levels that would raise caution in many other countries,” said Darrell Duffie, a Stanford University finance professor and former member of Moody’s board.
Investor sentiment may also be affected. Credit ratings are often used to gauge the risk of sovereign debt, and a lower rating may prompt some investors to seek higher returns or shift assets elsewhere. However, most analysts agree that U.S. Treasury bonds will continue to serve as a global benchmark for safety and liquidity in the near term.
The announcement comes as U.S. economic data shows weakening momentum. New figures from the Commerce Department indicate that the economy contracted at a 0.3% annual rate in the first quarter of the year, following 2.4% growth in the previous quarter. Rising imports and a drop in government spending contributed to the decline.
Congressional Democrats used the downgrade to criticize Trump’s fiscal policies. Senate Majority Leader Chuck Schumer said the downgrade should prompt Republicans to rethink tax plans that add to the deficit. “It’s time to focus on restoring fiscal responsibility,” Schumer said.
Despite the criticism, Trump and his allies maintain that economic growth and tax reform are essential for long-term fiscal health. The administration has signaled that it will continue to pursue legislation aimed at extending tax cuts and incentivizing business investment.
In its analysis, Moody’s also highlighted a structural concern: the U.S. political system’s frequent gridlock on fiscal matters. The agency referenced repeated debt ceiling stand-offs and short-term budget deals as contributing to investor uncertainty.
While the rating action does not suggest immediate default risk, it does place added pressure on policymakers to address long-term imbalances. Experts say that without changes in taxation or entitlement spending, the debt will continue to rise, forcing more resources to be allocated toward interest payments.
Moody’s concluded its statement by noting that the downgrade should serve as a call for renewed focus on sustainable fiscal planning. The agency said it will monitor developments closely but does not expect the outlook to change unless structural changes are made.
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