The United States lost its last perfect credit rating as Moody’s downgraded U.S. debt, triggering a direct attack from the White House on the credibility of Moody’s chief economist.
At a Glance
- Moody’s downgraded U.S. credit rating from AAA to Aa1, removing America’s last perfect credit score held since 1917
- Treasury Secretary Scott Bessent dismissed the downgrade while the White House challenged the credibility of Moody’s chief economist
- The downgrade comes amid Congressional debate over extending Trump-era tax cuts, with some Republicans concerned about insufficient spending cuts
- Experts warn the downgrade could increase government borrowing costs and potentially affect financial markets
Historic Credit Rating Loss
Moody’s Ratings downgraded the United States’ debt rating from AAA to Aa1, removing the nation’s last perfect credit rating which had been maintained since 1917. The decision aligns Moody’s assessment with both Fitch Ratings and S&P, which had previously downgraded U.S. debt in 2023 and 2011 respectively. This unanimous downgrade from all three major credit agencies marks a significant milestone in America’s fiscal standing on the global stage.
The downgrade was primarily influenced by the substantial increase in government debt and interest payment ratios over the past decade. Moody’s expressed concern that these financial metrics have deteriorated to levels “significantly higher than similarly rated sovereigns.” Despite the downgrade, Moody’s maintained a “stable” outlook for the United States, citing confidence in the Federal Reserve’s monetary policy effectiveness and the constitutional separation of powers.
MOODY'S DOWNGRADES USA CREDIT RATING: A Historic Shift Amid Rising Debt and Political Polarization
On May 16, 2025, Moody’s Ratings downgraded the United States’ sovereign credit rating from Aaa to Aa1, stripping the nation of its last triple-A rating from a major credit… pic.twitter.com/MlH94g3g4d
— Brian Harrod (@GetTheDailyDirt) May 17, 2025
White House and Treasury Response
The White House Communications Director Steven Cheung directly challenged the credibility of Moe Zandi, Moody’s Chief Economist, suggesting that Zandi’s economic predictions have consistently proven incorrect. This unusual public attack on a leading economic analyst highlights the administration’s frustration with the downgrade. Meanwhile, Treasury Secretary Scott Bessent adopted a dismissive tone toward the rating change, publicly stating, “I don’t put much credence in Moody’s.”
“The increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns,” stated Moody’s.
Bessent defended the administration’s economic strategy, arguing that extending the 2017 tax cuts would generate sufficient economic growth to offset national debt concerns. This position contradicts findings from the Congressional Budget Office, which determined that the previous round of tax cuts increased the federal deficit by nearly $1.9 trillion over a decade, despite Republican claims that they would pay for themselves through economic growth.
Congressional Tax Cut Debate
The downgrade comes at a critical moment as the Republican-controlled Congress works to advance President Trump’s tax-cut bill. The House Budget Committee initially rejected the legislation, with some Republican members expressing concerns about insufficient spending cuts to offset the tax reductions. Despite this setback, House Speaker Mike Johnson remains optimistic, stating the bill is still “on track” for passage and that further discussions are planned.
According to Moody’s Ratings: “The US was stripped of its last top credit rating by Moody’s Ratings, reflecting deepening concern that ballooning debt and deficits will damage America’s standing as the preeminent destination for global capital and increase the government’s borrowing costs.”
Nonpartisan analysts have warned that the proposed tax-cut measure could add trillions to the federal debt, which currently stands at $36.2 trillion. The urgency of the situation was underscored when the committee scheduled a rare Sunday night hearing to reconsider the bill. This timing coincides with Moody’s explicit concerns about “ballooning debt and deficits” potentially damaging America’s standing as a premier destination for global capital investment.
Potential Economic Impact
Financial experts warn that the downgrade could have tangible consequences for both the government and everyday Americans. The most immediate concern is the potential for higher borrowing costs for the U.S. government, which could necessitate higher tax collection or reduced spending in other areas. Additionally, the downgrade may impact financial markets and potentially lead to increased interest rates across various sectors of the economy.
Despite these concerns, Moody’s emphasized that the Aa1 rating still reflects strong confidence in the U.S. governance system. The agency specifically cited “its long history of very effective monetary policy led by an independent Federal Reserve” as a stabilizing factor. However, this assessment comes as President Trump has questioned the Federal Reserve’s independence and threatened to remove Chair Jerome Powell, adding another layer of complexity to the nation’s economic outlook.
