US Completely Loses Perfect Credit Rating for First Time in Over a Century

Moody’s Investors Service downgraded the U.S. government's credit rating on Friday, marking a significant shift in the country’s financial standing. The agency lowered the rating from its top-tier Aaa to Aa1, pointing to persistent failures across multiple administrations to rein in the nation's mounting debt. Despite the downgrade, Moody’s acknowledged that the U.S. still retains major advantages—such as a robust economy and the global dominance of the U.S. dollar—but emphasized that the country's fiscal outlook has sharply declined.

This downgrade marks the first time in over a century that the United States lacks a pristine rating from all three major credit agencies. Moody’s is now the final of the "Big Three" agencies to lower its evaluation of the federal government’s creditworthiness, following Standard & Poor’s downgrade in 2011 and Fitch’s in 2023.

In its statement, Moody’s—under the leadership of Chief Economist Mark Zandi—projected the federal deficit will rise to nearly 9% of GDP by 2035, up from 6.4% in 2024. The increase is attributed to surging interest payments, expanding entitlement spending, and stagnant revenue growth.

The agency also issued a stark warning: if the 2017 Trump-era tax cuts are extended—a key agenda item for the Republican-controlled Congress—the federal primary deficit could balloon by an additional $4 trillion over the next ten years. Moody’s emphasized that entrenched political stalemates continue to block meaningful fiscal reform. Republicans remain opposed to tax hikes, while Democrats push back against deep spending cuts, leaving little room for bipartisan compromise.

The ratings from Moody’s, S&P Global Ratings, and Fitch Ratings are crucial in shaping how investors and global markets view a nation's creditworthiness. These ratings impact everything from borrowing costs to investor confidence and broader economic stability. A top-tier rating signals low investment risk; a downgrade can drive up borrowing costs and stir financial uncertainty.

The U.S. had maintained perfect ratings from all three agencies for decades, a testament to its economic and political resilience. That changed in 2011 when S&P downgraded the nation following a bitter debt ceiling dispute. Fitch followed in 2023, citing fiscal decline and ongoing political dysfunction. Until now, Moody’s had preserved its AAA rating.

Founded in 1909, Moody’s is the oldest of the three major agencies and was originally created to provide independent bond risk analysis. S&P, dating back to 1860 and later consolidated into its current form, is widely known for its market indices and credit assessments. Fitch, established in 1914, is the smallest but still holds substantial influence in global financial markets. Collectively, these agencies wield significant power in shaping international perceptions of economic stability.

The downgrade has sparked political reaction. Democratic strategist Chris Jackson wrote on X (formerly Twitter):

“BREAKING: In a stunning move, Moody's has downgraded the U.S. credit rating from Aaa to Aa1—for the first time in history. That's right: the only major credit agency that hadn't downgraded us under Trump just did. Who else enjoying all this 'economic winning' under Trump?"

In contrast, Trump’s communications director Steven Cheung lashed out at Moody’s chief economist, writing:

“Mark Zandi, the economist for Moody’s, is an Obama advisor and Clinton donor who has been a Never Trumper since 2016. Nobody takes his ‘analysis’ seriously. He has been proven wrong time and time again.”