BBC:
The US has lost its last perfect credit rating, as influential ratings firm Moody’s expressed concern over the government’s ability to pay back its debt.
In lowering the US rating from ‘AAA’ to ‘Aa1’, Moody’s noted that successive US administrations had failed to reverse ballooning deficits and interest costs.
A triple-A rating signifies a country’s highest possible credit reliability, and indicates it is considered to be in very good financial health with a strong capacity to repay its debts.
Moody’s warned in 2023 the US triple-A rating was at risk. Fitch Ratings downgraded the US in 2023 and S&P Global Ratings did so in 2011. Moody’s held a perfect credit rating for the US since 1917.
The downgrade “reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns,” Moody’s said in the statement.
In a statement, the White House said it was “focused on fixing Biden’s mess”, while taking a swipe at Moody’s.
“If Moody’s had any credibility,” White House spokesman Kush Desai said, “they would not have stayed silent as the fiscal disaster of the past four years unfolded.”
A lower credit rating means countries are more likely to default on their sovereign debt, and generally face higher borrowing costs.
Moody’s maintained that the US “retains exceptional credit strengths such as size, resilience and dynamism and the continued role of the US dollar as the global reserve currency”.
The firm said it expects federal debt to increase to around 134% of gross domestic product (GDP) by 2035, up from 98% last year.
GDP is a measure of all the economic activity of companies, governments, and people in a country.
The BBC has reached out to the US Department of Treasury for comment.
The downgrade came on the same day as Trump’s landmark spending bill suffered a setback in Congress.
Trump’s so-called “big, beautiful bill” failed to pass the House Budget Committee, with some Republicans voting against it.
Figures showed the US economy shrank in the first three months of the year as government spending fell and imports surged due to firms racing to get goods into the country ahead of tariffs.
The economy contracted at an annual rate of 0.3%, a sharp downturn after growth of 2.4% in the previous quarter, the Commerce Department said.
