Moody’s Ratings downgraded the United States’ debt on Friday, stripping the country of its last perfect credit rating. The move could rattle financial markets and push up interest rates, potentially creating an additional financial burden for Americans already struggling with tariffs and inflation. Of the three major credit rating agencies, Moody’s was the lone holdout, maintaining its outstanding rating of AAA for US debt. Moody’s held a perfect credit rating for the United States since 1917. It now ranks US creditworthiness one notch below that, at Aa1, joining Fitch Ratings and S&P, which lowered their credit ratings for US debt in 2023 and 2011, respectively. The decision to downgrade debt was influenced by “the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns,” Moody’s said in a statement. Moving forward, Moody’s said it expects borrowing needs to continue to grow and for it to weigh on the US economy as a whole. Spokespeople for the White House and Treasury Department did not immediately respond to CNN. Moody’s initially put the United States on notice for a potential downgrade in November, at the time citing recent events that exemplified America’s extraordinary political divide. That included America’s near-default last summer and the resulting ouster of House Speaker Kevin McCarthy, the first time in history a speaker was given the boot during a legislative session, and Congress’ inability to cement a replacement for weeks. Stable outlook — for now, at least Moody’s said the US is is no immediate danger of being downgraded again: The credit-rating agency considers the US outlook “stable” in part because of “its long history of very effective monetary policy led by an independent Federal Reserve.” President Donald Trump, however, has recently raised questions of whether he’d continue to respect the central bank’s independence, and has previously threatened to fire Chair Jerome Powell. Aa1 is still quite strong, despite its notch below perfect. The ratings agency noted that America’s system of governance, albeit challenged, gives Moody’s confidence that the United States still deserves a near-perfect, if not AAA, credit rating. “The stable outlook also takes into account institutional features, including the constitutional separation of powers among the three branches of government that contributes to policy effectiveness over time and is relatively insensitive to events over a short period. While these institutional arrangements can be tested at times, we expect them to remain strong and resilient,” Moody’s said. The credit-rating agency said that increasing government revenue or reducing spending could restore America’s AAA rating. Trump has taken aim at the latter through the Elon Musk-led Department of Government Efficiency, resulting in thousands of federal government workers being laid off and the gutting of the US Agency for International Development (USAID). However, it’s unclear that such moves are changing the government’s borrowing needs. Already, the country is approaching a summer deadline for when the US could default on its debt unless the borrowing limit is raised, according to Treasury Department estimates. At the same time, Trump is pushing Congress to pass his “One Big Beautiful Bill Act.” The package would cut taxes deeply – essentially making permanent the sweeping individual income tax provisions of Trump’s 2017 Tax Cuts and Jobs Act, as well as adding several temporary tax breaks to fulfill the president’s campaign promises. It also calls for historic cuts to the nation’s safety net – particularly Medicaid and food stamps – in an effort to cut spending. But the tax revenue loss would still swamp the spending reductions. The package would add $3.3 trillion to the nation’s debt over the next decade, according to a preliminary estimate from the Committee for a Responsible Federal Budget. Annual deficits would jump from $1.8 trillion in 2024 to $2.9 trillion by 2034 as the federal government would continue to spend more than it would raise in revenue, the committee projected. Why America lost its AAA rating Ballooning deficits, the unique US debt ceiling mechanism and political intransigence have been at the center of its downgrades from all three major credit ratings agencies. In 2011, S&P cited “political brinksmanship” and “America’s governance and policymaking becoming less stable, less effective, and less predictable.” In 2023, Fitch warned of the United States’ “fiscal deterioration,” its “high and growing general government debt burden, and the erosion of governance.” America was running a $1.3 trillion annual budget deficit in 2011, a number that has since risen to $1.8 trillion last year. Still, the Obama and Biden administrations lambasted both of those decisions. In 2023, Yellen said the decision was “arbitrary and based on outdated data.” This is a developing story and will be updated.
The United States just lost its last perfect credit rating
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"Moody's Downgrades U.S. Credit Rating for First Time Since 1917"
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TruthLens AI Summary
Moody's Ratings has downgraded the United States' debt, marking the end of its last perfect credit rating, which had been maintained since 1917. The new rating of Aa1 places the U.S. one notch below the coveted AAA status, joining Fitch Ratings and S&P Global, which had previously lowered their ratings in 2023 and 2011, respectively. This downgrade is anticipated to unsettle financial markets and elevate interest rates, exacerbating the financial strain on Americans already facing challenges from inflation and tariffs. The decision was influenced by a decade-long increase in government debt and interest payment ratios, which now surpass those of similarly rated sovereign nations. Moody's anticipates that the U.S. will continue to experience rising borrowing needs, impacting the overall economy. Notably, the agency's outlook remains stable, crediting the country's historical effectiveness in monetary policy led by an independent Federal Reserve, despite recent political turmoil that has raised questions about this independence.
The downgrade reflects broader concerns about the U.S. fiscal health, with significant budget deficits and a unique debt ceiling mechanism contributing to the deterioration of creditworthiness. Current projections suggest that annual deficits could escalate from $1.8 trillion in 2024 to $2.9 trillion by 2034, driven by President Trump's proposed tax cuts and spending reductions, which are expected to add approximately $3.3 trillion to the national debt over the next decade. Political intransigence and governance challenges have been cited as factors in the downgrades by all three major credit rating agencies. Despite these challenges, Moody's emphasizes the resilience of the U.S. governance system, which may still support a near-perfect credit rating if government revenue increases or spending decreases are realized. The situation remains fluid, with ongoing discussions about potential fiscal reforms and the looming deadline for raising the national borrowing limit, underscoring the urgency of addressing the nation's fiscal trajectory.
TruthLens AI Analysis
The recent downgrade of the United States' credit rating by Moody's Ratings marks a significant shift in the economic landscape. This decision, which strips the nation of its last perfect credit rating, could have far-reaching consequences for financial markets and ordinary Americans. By analyzing the implications of this downgrade, we can better understand the potential motivations behind the report and its broader impact on society.
Impact on Financial Markets
The downgrade is likely to create turbulence in financial markets, leading to increased interest rates. This could place an additional burden on Americans who are already facing challenges due to tariffs and inflation. The fact that Moody's has maintained a AAA rating for the U.S. since 1917 speaks volumes about the significance of this shift. Financial markets tend to react negatively to such news, and investors may become more cautious, potentially leading to a decrease in stock prices.
Public Perception and Political Climate
This news may be intended to influence public perception regarding the effectiveness of current fiscal policies and the political climate in the U.S. The downgrade follows a period of political dysfunction, including a near-default situation last summer and the unprecedented ousting of House Speaker Kevin McCarthy. Such events highlight the political divide within the country, which could be a cause for concern among investors and the general public alike.
Potential Concealment of Other Issues
While the primary focus of the article is on the credit rating and its implications, it may also serve to distract from other pressing issues in the economy or politics. By emphasizing the downgrade, the narrative could be shifting attention away from other economic challenges or failures in governance that may also need addressing.
Manipulative Aspects of the Report
There are elements in the news that could be seen as manipulative. The language used highlights the longstanding stability of U.S. monetary policy while simultaneously introducing uncertainty regarding the future. This duality could serve to create fear while also attempting to reassure the public about the Federal Reserve's independence. The overall tone suggests a need for vigilance without providing concrete solutions, which may lead to a sense of unease.
Reliability of the Information
The information presented appears credible, given that it comes from a reputable source, Moody’s Ratings. However, the framing of the downgrade and its implications may be influenced by the agency's own biases and the current economic and political climate. The focus on the downgrade might overshadow other economic indicators that are performing well, thus skewing public perception.
Community Response
The article seems to resonate more with communities concerned about economic stability and fiscal responsibility. It may appeal to those who are already skeptical of government spending and are looking for accountability. The audience targeted by this news may include investors, policymakers, and citizens worried about the future of the U.S. economy.
Global Economic Context
From a global perspective, the downgrade of the U.S. credit rating could impact international markets, particularly if it leads to increased borrowing costs. Investors worldwide monitor U.S. financial stability closely, and any signs of weakness could lead to shifts in global investment strategies. This news aligns with ongoing discussions about the U.S.'s role in the global economy and its financial health.
AI Influence in Reporting
There may be the potential for AI to have played a role in drafting or optimizing this news piece, particularly in the analysis of data trends or in generating language that appeals to specific audiences. AI models could be used to assess the impact of such news on market behaviors and public sentiment, framing the narrative to drive engagement.
Overall, the analysis of this news indicates a calculated presentation of information that seeks to inform but also potentially manipulate public perception regarding America's creditworthiness and economic stability. The implications of this downgrade could reverberate across various sectors, impacting both the economy and the political landscape.