The United States has officially lost its last perfect credit rating as Moody’s downgraded the nation from AAA to Aa1, citing long-term fiscal challenges, rising debt burdens, and growing interest costs. This marks the first time in over a century—since 1917—that the U.S. no longer holds a top-tier credit assessment from any of the “Big Three” agencies.
The downgrade was a major blow to investor confidence and could increase borrowing costs for the federal government. Moody’s noted in its statement that the U.S. debt-to-GDP ratio is projected to reach 134% by 2035, up from 98% in 2024.
Why Was the US Downgraded?
According to Moody’s official release, the downgrade reflects:
- Decades of rising deficits across administrations
- Ballooning federal debt levels
- High interest payments relative to GDP
- Repeated political gridlock on fiscal reform
Although the U.S. maintains “exceptional credit strengths” such as economic size, resilience, and the global reserve status of the dollar, Moody’s emphasized that these factors no longer offset its deteriorating fiscal profile.
White House and Political Reactions
The Biden administration, through spokesperson Kush Desai, criticized the downgrade, saying: “If Moody’s had any credibility, they would not have stayed silent as the fiscal disaster of the past four years unfolded.” The administration added it was “focused on fixing Biden’s mess,” attempting to shift blame for the current economic situation.
The downgrade came on the same day Trump’s proposed spending bill—dubbed the “big, beautiful bill”—failed to advance in Congress, with several Republicans opposing the package amid concerns over fiscal responsibility.
Economic Impact and Recession Warning
Adding to the economic unease, the U.S. economy contracted by 0.3% in Q1 2025, according to the Commerce Department. The decline was attributed to reduced government spending and an import surge driven by tariff fears.
Experts warn that the downgrade may further erode global investor confidence and increase treasury yields, which could ripple through housing, infrastructure, and commercial borrowing markets.
Global Credit Comparison
The U.S. now joins a group of developed nations with slightly lower creditworthiness. For comparative analysis, visit our Global Credit Ratings section to see how the U.S. ranks among its peers in 2025.
What’s Next for the US Economy?
With the economy shrinking, political discord mounting, and debt levels rising, many are asking if this is a short-term hit—or a long-term signal of deeper instability.
Read more about how the Biden administration is handling economic challenges in our fiscal policy analysis.
For real-time updates, stay tuned to our US News and Economy sections.
