The Blubber

The United States has lost its final top-tier credit rating after Moody’s downgraded the country from ‘AAA’ to ‘Aa1’, citing growing concerns about the government’s ability to manage its rising debt load.

Moody’s pointed to the failure of successive U.S. administrations to rein in expanding deficits and mounting interest costs. A ‘AAA’ rating represents the highest level of creditworthiness, suggesting a nation is in excellent financial health and has a strong ability to repay its obligations.

Moody’s had already warned in 2023 that the U.S.’s perfect rating was under threat. Fitch Ratings downgraded the U.S. that year, and S&P Global Ratings made a similar move back in 2011. Until now, Moody’s had maintained a top rating for the U.S. since 1917.

“The downgrade reflects more than a decade of rising government debt and interest burdens, which are now significantly higher than other similarly rated countries,” the agency said in its announcement.

The White House responded by defending its fiscal approach and criticizing the timing of Moody’s decision. “If Moody’s had any credibility,” said spokesman Kush Desai, “they wouldn’t have stayed silent while the fiscal disaster of the last four years unfolded.”

A downgrade generally means a country is seen as riskier to lend to, which can lead to higher borrowing costs.

Still, Moody’s noted that the U.S. continues to possess “exceptional credit strengths,” including its economic scale, resilience, and the dominant role of the U.S. dollar as the world’s reserve currency.

The agency projected that federal debt will rise to about 134% of GDP by 2035, up from 98% last year. GDP measures the total value of goods and services produced in a country.

The BBC has reached out to the U.S. Treasury Department for comment.

The downgrade came as Trump’s flagship spending legislation suffered a blow in Congress. His “big, beautiful bill” failed in the House Budget Committee after several Republicans joined Democrats in opposition.

Meanwhile, new data showed that the U.S. economy shrank in the first quarter of the year. The Commerce Department reported a 0.3% annual contraction, down sharply from 2.4% growth in the previous quarter. The decline was driven by reduced government spending and a spike in imports, as companies rushed to bring in goods before new tariffs took effect.