Moody’s strips US of last top credit rating over debt concerns

The US has lost its final AAA credit rating after Moody’s downgraded the country to Aa1, citing growing deficits and mounting debt as risks to long-term fiscal health.

Moody’s said America’s economic strength no longer offsets its worsening budget outlook and blamed “repeated debt increases with no meaningful fiscal reforms.” The downgrade comes after a warning last year and brings Moody’s in line with Fitch and S&P, who already cut the US rating in earlier years.

The agency said it now expects US deficits to rise to nearly 9% of GDP by 2035, driven by rising interest costs and spending on programs like Social Security and Medicare.

The downgrade triggered immediate market reaction — 10-year Treasury yields climbed to 4.49%, while stock futures dipped.

The decision lands amid ongoing battles in Congress over a massive tax-and-spending bill. A key House panel failed to advance the package Friday, after some Republicans defied President TRUMP and blocked it over cost concerns. The bill could add nearly $4 trillion to the debt, and even more if temporary tax cuts are extended.

Treasury Secretary Scott Bessent has previously warned lawmakers the US is on an “unsustainable” fiscal path. “The debt numbers are scary,” he told Congress in May, adding a credit shock could freeze the economy.

Economists are split. Some, like former White House adviser Joseph Lavorgna, say the downgrade is ill-timed and unnecessary, pointing to strong US productivity and growth. But others warn that rising borrowing costs could deepen fiscal pressure.

The US debt has now surpassed the size of its economy, and with interest rates still high, the cost of servicing that debt continues to rise. The Congressional Budget Office warns US debt will reach 107% of GDP by 2029 — higher than at any point since World War II.

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