The credit rating of the United States received a potentially costly downgrade on Friday, as the ratings firm Moody’s determined that the government’s fiscal outlook had deteriorated as a result of rising debt levels and stood to worsen further if Republicans enact a package of new tax cuts.
The downgrade, to one notch below the highest triple-A rating, amounted to a political and economic repudiation of Washington, where President Trump only hours earlier had pushed his party to adopt a sprawling package that might add trillions of dollars to the nation’s fiscal imbalance.
The downgrade from Moody’s means that each of the three major credit rating agencies no longer gives the United States its best rating. Fitch downgraded the United States in 2023, citing fiscal concerns, and Standard & Poor’s downgraded the country in 2011.
Moody’s pointed to decades of gridlock and dysfunction in the nation’s capital. It found that Democrats and Republicans alike had failed to meaningfully curtail rising U.S. debt, which now towers above $36 trillion.
Nor had the U.S. government tended to myriad well-known, and long-term, financial challenges, Moody’s said, especially the rising costs and persistent underfunding of programs like Social Security and Medicare.
While Moody’s described the U.S. financial system as stable, and found the dollar to be strong and reliable, it also acknowledged the vast policy uncertainty — and it obliquely referred to the ways in which political stability and constitutional order can be “tested at times.”
“Successive U.S. administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs,” the report from Moody’s said. “We do not believe that material multiyear reductions in mandatory spending and deficits will result from current fiscal proposals under consideration.”
Moody’s specifically referred to the Republican push to renew the tax cuts adopted under Mr. Trump in 2017, estimating that an extension would add $4 trillion to the deficit over the next decade.
Still, even with the lower assessments from the rating agencies, investors are likely to snap up the American government’s debt. That’s a reflection of the dollar’s status as the global reserve currency, meaning people from all over the world want to stash their savings in U.S. Treasury bonds even as the government accrues more and more debt.
The White House did not immediately respond to a request for comment.
The decision from Moody’s comes as Republicans struggle to agree to a sprawling fiscal package cutting taxes and reducing spending, with the effort briefly stalling on Friday as some hard-right conservatives demanded steeper spending cuts.
Even with cuts to Medicaid and food stamps that could strip benefits from millions of poorer Americans, Republicans are still not expected to cover anywhere near the $3.8 trillion cost of the tax cut they have prepared. The Trump administration’s blitz to fire much of the federal work force and unilaterally withhold spending has also not generated significant savings.
Tony Romm is a reporter covering economic policy and the Trump administration for The Times, based in Washington.
Andrew Duehren covers tax policy for The Times from Washington.
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