Moody’s Ratings downgraded the U.S. government’s credit rating Friday from Aaa to Aa1, citing mounting federal deficits and a political system unable to reverse the country’s growing debt burden. The downgrade marks the third and final top-tier credit agency to strip the federal government of its top rating.
Moody’s warned that deficits could hit 9% of GDP by 2035, up from 6.4% in 2024, largely due to rising interest payments, entitlement spending, and weak revenue growth. The agency noted that extending President Trump‘s 2017 tax cuts would add $4 trillion to the primary deficit over the next decade.
Despite the downgrade, Moody’s cited the U.S. economy’s “resilience and dynamism” and the dollar’s global reserve status as enduring credit strengths.
The downgrade came the same day House Republicans failed to pass a major budget reconciliation bill after internal divisions derailed efforts to offset Trump-era tax cuts with spending reductions.
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