On Friday, Moody’s announced it has downgraded the United States’ credit rating from Triple A to Double A.
The agency’s decision to lower the rating from “AAA” to “AA1” stems from worries about rising debt and the federal government’s growing interest payments.
This downgrade indicates that the ratio of the government’s debt-interest payments has reached a level much higher than comparable countries, according to a statement released by Moody’s.
This action follows a negative outlook from Moody’s issued in November 2023 concerning the US AAA ratings.
Additonally, Fitch also downgraded the US credit rating in 2023, amid concerns of minimal debt default, and this has fueled a contentious debate over the debt ceiling between Democrats and Republicans in Congress.
Fitch attributed its downgrade to “Governance Erosion.”
In their 2023 assessment, analysts from Fitch highlighted that the US was expected to experience financial decline over the next three years due to growing government debt and governance issues relative to other nations rated ‘AA’ and ‘AAA’ over the last two decades.
Moody’s, similar to Fitch, pointed out that the downgrade reflects US financial conditions over the past ten years.
They project that the federal deficit may rise to nearly 9% of GDP within the next decade, increasing from 6.4% in 2024, mainly due to higher debt, eligibility expenditures, and increased interest payments on lower income generation, according to Moody’s analysis released Friday.
An extensive Republican package advancing through Congress aims to continue President Trump’s 2017 tax cuts and is projected to add over $3.8 trillion to the deficit in the upcoming nine years.
Conversely, Congressional Democrats are requesting official projections from the Joint Committee on Taxation for the next decade, estimating the bill could exceed $4 trillion in costs.
The Joint Committee has indicated that extending individual tax cuts could cost around $2.2 trillion.
