US loses last triple-A credit rating as Moody's cuts over government debt

The US has lost its triple-A credit rating from a major agency as mounting government debt led congressmembers said the action is a reminder that the 'nation's fiscal house is not in order.'

Moody's downgraded of the country's rating from AAA to AA1 comes as Trump's flagship spending bill failed to pass in Congress following fiscal Republican opposition. 

The credit rating agency said the demotion was due to 'the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns.' 

It further warned that it expects federal deficits to widen to nearly nine percent of economic output by 2035. 

The projection is up from 6.4 percent last year, and said to be 'driven mainly by increased interest payments on debt, rising entitlement spending, and relatively low revenue generation.' 

As a result, it expects the federal debt burden to increase to about 134 percent of gross domestic product (GDP) by 2035, compared to 98 percent last year, AP reported. 

The White House responded through Steven Cheung, the White House communications director, who singled out the chief economist of Moody's Analytics. 

'Mark Zandi, the economist for Moody's, is an Obama advisor and Clinton donor who has been a Never Trumper since 2016,' Cheung wrote. 

The US has lost its triple-A credit rating, from Aaa to Aa1, from credit rating agency Moody's which blamed government debt for the blow

The credit rating agency said the demotion was due to 'the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns'

The White House responded through Steven Cheung, the White House communications director, condemned Moody's analysis and singled out the chief economist of Moody's Analytics, Mark Zandi

'Nobody takes his "analysis" seriously. He has been proven wrong time and time again.' 

Moody's decision to downgrade the United States from its top credit rating follows similar decisions from the two other major US ratings agencies, S&P and Fitch.

S&P was the first to cut its rating for the United States back in 2011, during Barack Obama's first term in office, citing its concerns that a debt management plan 'would be necessary to stabilize the government's medium-term debt dynamics.'

Twelve years later, Fitch followed suit, warning of 'a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters.'

Moody's echoed its peers in its decision Friday, noting in a statement that 'successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs.'

'We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration,' it added, flagging that it expected larger deficits to continue over the next decade.

America's 'fiscal performance is likely to deteriorate relative to its own past and compared to other highly-rated sovereigns,' Moody's said.

Republican congressman French Hill, who chairs the House Financial Services Committee, said Moody's downgrade 'is a strong reminder that our nation's fiscal house is not in order.'

The Moody's decision comes amid a tough fight in Congress to pass Trump's much-touted 'big, beautiful' spending bill, which aims to revamp and renew a roughly $5 trillion extension of his 2017 tax relief

Brendan Boyle, the ranking Democrat on the House Budget Committee, said the downgrade 'is a direct warning: our fiscal outlook is deteriorating, and House Republicans are determined to make it worse'

Republican congressman French Hill, who chairs the House Financial Services Committee, said Moody's downgrade 'is a strong reminder that our nation's fiscal house is not in order'

House Republicans 'are committed to taking steps to restore fiscal stability, address the structural drivers of our debt, and foster a pro-growth economic environment,' he added.

Brendan Boyle, the ranking Democrat on the House Budget Committee, said the downgrade 'is a direct warning: our fiscal outlook is deteriorating, and House Republicans are determined to make it worse.'

'The question is whether Republicans are ready to wake up to the damage they're causing,' Boyle said.

On Friday, the agency also changed its outlook from 'negative' to 'stable,' noting that despite the United States' poor record tackling rising government debt levels, the country 'retains exceptional credit strengths such as the size, resilience and dynamism of its economy and the role of the US dollar as global reserve currency.'

The Moody's decision comes amid a tough fight in Congress to pass Trump's much-touted 'big, beautiful' spending bill, which aims to revamp and renew a roughly $5 trillion extension of his 2017 tax relief.  

The relief was set to be paid for, partially, through deep cuts to the Medicaid health insurance program that covers more than 70 million lower-income people.