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5h ago

Moody’s Downgrade Strips U.S. of Last AAA Credit Rating

The downgrade, citing ballooning debt and rising interest costs, has intensified debates over tax cuts and fiscal discipline as Treasury yields hit new highs.

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What Credit Rating Cut Means For America

Overview

  • Moody’s downgraded the U.S. credit rating from Aaa to Aa1, marking the first cut by the agency since 1949 and following earlier downgrades by S&P in 2011 and Fitch in 2023.
  • The decision was driven by decades of rising federal debt, now at $36 trillion, and interest costs projected to exceed $1 trillion annually by 2026.
  • Market reactions included a spike in 10-year Treasury yields to over 4.5%, signaling higher borrowing costs for the government and consumers.
  • The White House dismissed the downgrade as politically motivated, while Congress debates extending the 2017 tax cuts, which Moody’s warns could add $4 trillion to the deficit over a decade.
  • Moody’s projects the federal deficit to widen to 9% of GDP by 2035, with debt-to-GDP rising to 134%, underscoring calls for structural fiscal reforms.