The US Lost Its Last Perfect Credit Rating After Moody's Decision.

Moody's Downgraded US Credit Rating

Moody's Ratings agency downgraded the US credit rating on Friday, stripping the country of its last perfect creditworthiness rating. This move could shake financial markets and push interest rates higher, potentially creating an additional financial burden for Americans who are already struggling with rates and inflation, CNN reports.

Rating Change

Out of the three major rating agencies, Moody's was the last to maintain the highest AAA rating for US debt. Moody's had upheld the perfect credit rating for the US since 1917. Now, the agency assesses the creditworthiness of the US one notch lower — Aa1, joining Fitch Ratings and S&P, which downgraded their credit ratings for US debt in 2023 and 2011, respectively.

Reasons for Downgrading the Rating

The decision to downgrade the rating was caused by 'a decade-long increase in federal debt and ratios of interest payments to levels that are significantly higher than those of similarly rated sovereign states,' Moody's stated in its announcement. Furthermore, Moody's expects borrowing needs to continue to rise and impact the US economy as a whole.

The Trump administration and Republicans are focused on fixing Biden's mess by cutting waste, fraud, and abuse in government and passing 'One Big Beautiful Bill' to get our house in order.

Moody's initially warned the United States of a potential downgrade in November, citing recent events that demonstrated the extraordinary political divide in America. This included America's near-default last summer and the subsequent ousting of House Speaker Kevin McCarthy, the first Time in history a speaker was removed during a legislative session, as well as Congress's inability to approve a replacement for weeks.

Even though Aa1 is still quite a high rating, it is a step below perfect. The rating agency noted that America's governance system, despite challenges, gives Moody's confidence that the United States still deserves an almost perfect credit rating, if not AAA.

The rating agency mentioned that an increase in government revenues or spending cuts could restore America's AAA rating. Trump targeted the latter through the Elon Musk-led Department of Government Efficiency, resulting in the layoff of thousands of federal workers and cuts to the US Agency for International Development (USAID).

However, experts say that the 'One Big Beautiful Bill Act' package being pushed by Trump would add $3.3 trillion to the nation's federal debt over the next decade, according to preliminary estimates from the Committee for a Responsible Federal Budget.

The downgrade of the credit rating could have serious consequences for the US economy and its citizens who are already facing economic troubles. Possible spending constraints and increased financial pressure on households may lead to a further rise in overall household debt.