Moody’s downgrades US credit rating, citing rising debt

Moody’s Ratings Service on Friday said it is downgrading the U.S.’s creditworthiness in response to an increase in government debt over the past decade and rising interest payments, in a blow to the Trump administration that could push up borrowing costs.

The downgrade, which puts the U.S. one notch below the highest credit rating, was “driven mainly by increased interest payments on debt, rising entitlement spending, and relatively low revenue generation,” it said.

Moody’s message: The fiscal outlook has not improved since the firm put the federal government on notice in November 2023 that it was at risk of losing its pristine reputation as a borrower.

The announcement comes as Republicans are debating President Donald Trump’s “big, beautiful bill” that would extend 2017 tax cuts, with some hard-line conservatives fighting to limit the increase to federal spending deficits. But those deficits would increase even under conditions outlined by that group. The House Budget Committee voted against advancing the package Friday.

“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,” Moody’s said. “We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration.”

The announcement raises the risk that investors could demand that the U.S. pay higher yields on its debt.

The White House blamed former President Joe Biden and congressional Democrats for pursuing “spending that piled on our national debt, fueled runaway inflation, and forced the Fed to raise interest rates for everyday Americans.”

“The Trump administration and Republicans are focused on fixing Biden’s mess by slashing the waste, fraud, and abuse in government and passing The One, Big, Beautiful Bill to get our house back in order,” White House spokesperson Kush Desai said in a statement. “If Moody’s had any credibility, they would not have stayed silent as the fiscal disaster of the past four years unfolded.”

Senate Minority Leader Chuck Schumer, meanwhile, said Moody’s action “should be a wake-up call to Trump and Congressional Republicans to end their reckless pursuit of their deficit-busting tax giveaway.”

“Sadly, I am not holding my breath — today’s GOP simply does not care about deficits or our nation’s fiscal health,” he said in a statement. “Republicans are hell-bent on a multi-trillion tax cut for the ultra-wealthy, leading to nothing but higher prices, more debt, and fewer jobs.”

The ratings service said it expects deficits to reach nearly 9 percent of GDP by 2035, up from 6.4 percent in 2024 — already an unusually large number. Treasury Secretary Scott Bessent has said he would like to achieve a deficit-to-GDP ratio of 3 percent.

Moody’s is the last of the three major credit rating firms to say the U.S. no longer qualifies for the highest level of creditworthiness. Fitch lowered its rating for U.S. government debt in 2023, while Standard & Poor’s did so more than a decade ago following an 11th-hour showdown over raising the debt ceiling.