Moody’s Investors Service downgraded the United States’ long-term credit rating from Aaa to Aa1 on May 16, 2025, citing growing concerns over the federal government’s ballooning debt levels, structural fiscal deficits, and rising interest costs. This marks the first time the U.S. has lost its top-tier rating from Moody’s, following earlier downgrades by S&P in 2011 and Fitch in 2023.
In its statement, Moody’s criticized both Congress and multiple presidential administrations for failing to enact effective policies to stabilize the country’s finances. The agency noted that the U.S. has consistently run large annual deficits, and that debt service obligations are projected to increase sharply in the coming years. Moody’s expects federal deficits to rise from 6.4% of GDP in 2024 to nearly 9% by 2035, with long-term debt possibly climbing from 98% to 134% of GDP, depending on fiscal policy decisions.
Moody’s emphasized the impact of ongoing political gridlock, highlighting repeated failures by lawmakers to reach bipartisan agreement on deficit-reduction plans. The agency also noted that extending the 2017 tax cuts passed under former President Donald Trump would add an estimated $4 trillion to the primary deficit over the next decade.
Despite the downgrade, Moody’s reaffirmed the U.S. short-term rating and acknowledged the country’s enduring credit strengths, including the size of its economy and the dollar’s role as the world’s primary reserve currency. The U.S. Treasury Department called the decision disappointing, maintaining that the economy remains fundamentally strong.
