Moody’s has officially downgraded the United States’ credit rating from AAA to Aa1, the first time since 1919 that the country holds no top-tier rating from any of the big three agencies. The downgrade comes amid concerns over the ballooning federal deficit and the unsustainable rise in interest payments. Last year alone, the US paid more than $1.1 trillion just in interest, a figure that surpasses the entire Pentagon budget and raises serious questions about long-term fiscal discipline.
The decision has generated strong reactions from both political and financial circles. Treasury Secretary Scott Bessent dismissed the move as outdated and irrelevant, calling it a lagging indicator. However, the markets didn’t shrug it off. US stock futures slipped, and long-term Treasury yields spiked to 5%, a clear signal of investor discomfort. Analysts believe that a downgrade like this, even if symbolic, influences global perceptions of American financial stability.
This development couldn’t come at a more volatile time. Lawmakers are currently clashing over a proposed tax bill expected to inflate the deficit by another $4.2 trillion over the next ten years. Moody’s statement highlights that the country may soon need to borrow more just to pay the interest on existing debt. While Washington debates policy, the reality of rising debt servicing costs continues to weigh on the economy’s trajectory and global standing.
Despite the downgrade, Moody’s maintains a stable outlook for the US, citing strong underlying economic fundamentals and the dollar’s continued dominance as the global reserve currency. Still, the downgrade is a red flag that can’t be ignored. It underlines deep structural fiscal issues that neither political rhetoric nor market optimism can fix overnight. The world is watching how the US handles its growing debt—and whether faith in its creditworthiness can be restored.
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