Moody’s has downgraded the United States’ sovereign credit rating by one notch, citing the country’s mounting $36 trillion debt and persistent fiscal deficits.
The credit rating was cut from the top-tier “Aaa” to “Aa1” on Friday, marking the first such downgrade by Moody’s since it began rating the U.S. in 1919.
The decision comes amid growing concerns about rising interest payments and the failure of successive U.S. administrations and Congress to implement measures to rein in spending or increase revenues. While Moody’s shifted the outlook from “negative” to “stable,” it highlighted the unsustainable trajectory of U.S. fiscal policy.
The move sparked strong reactions from allies of President Donald Trump. Stephen Moore, a former senior economic advisor to Trump, labeled the downgrade “outrageous,” questioning how U.S.-backed government bonds could be considered anything less than top-tier assets.
White House communications director Steven Cheung criticized Mark Zandi, chief economist at Moody’s Analytics, calling him a political opponent of Trump. However, Zandi declined to comment, and Moody’s clarified that Moody’s Analytics operates independently from its credit ratings division.
Despite Trump’s pledge to balance the budget and reduce borrowing costs through various reforms — including spending cuts via the Department of Government Efficiency and new tariffs — investors remain unconvinced. The downgrade could now complicate the administration’s fiscal plans and trigger volatility in global markets.
Analysts warned that if debt concerns are not addressed, the U.S. could face further economic instability. Stanford finance professor Darrell Duffie remarked, “Congress is just going to have to discipline itself — either raise more revenue or cut spending.”
