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The United States has lost its last top-tier credit rating after Moody’s downgraded the country’s long-standing AAA score to Aa1. The move reflects growing concerns over rising debt, higher interest payments, and long-term fiscal risks.

Moody’s made the announcement this week, citing the continued rise in U.S. budget deficits and the growing cost of borrowing. The agency warned that without major policy changes, the federal government’s ability to manage its finances could weaken even further.

The downgrade marks the end of an era. Moody’s had upheld the U.S. triple-A rating since 1917. Now, none of the three major agencies—Moody’s, Fitch, or S&P Global—rates the U.S. as having a perfect credit score.

Why Did Moody’s Lower the U.S. Rating?

Moody’s analysts pointed to several worrying trends. The U.S. federal deficit is growing faster than expected, and interest payments are rising as the Federal Reserve holds rates high to fight inflation.

The agency also highlighted a lack of effective action from political leaders to rein in spending or raise revenue. “There has been no meaningful progress on addressing long-term fiscal pressures,” Moody’s said.

In 2023, Moody’s had already issued a warning about the risk of a downgrade. Fitch followed through with its own downgrade in August 2023. S&P Global had cut the U.S. rating back in 2011. Now, Moody’s has joined them.

White House Pushes Back Against Moody’s Decision

In response to the downgrade, the White House criticized Moody’s assessment. A spokesperson said the agency ignored earlier periods of what they called “fiscal mismanagement” and claimed the timing of the downgrade was flawed.

The administration stated that the U.S. economy remains strong and that the country’s global financial position is unmatched. Officials argued that Moody’s failed to reflect this strength in its latest rating.

What the Downgrade Means for the Economy

A lower credit rating may lead to higher borrowing costs for the federal government. That’s because investors may demand more interest in exchange for taking on higher risk.

Moody’s, however, acknowledged that the U.S. still benefits from key advantages. These include a large, diverse economy and the U.S. dollar’s dominant role in global finance.

Still, the agency projects troubling trends. Federal debt is expected to reach 134% of GDP by 2035, up from 98% in 2024. That would put the U.S. far above most other advanced economies.

Political Deadlock and Slowing Growth Raise New Worries

The credit downgrade came just as a major budget plan backed by Republicans failed to move forward in Congress. The proposal, informally dubbed the “big, beautiful bill,” was stalled in committee after several GOP lawmakers voiced opposition.

At the same time, new economic data showed the U.S. economy shrank slightly in the first quarter of the year. A surge in imports and lower government spending drove a 0.3% annualized decline in GDP. That’s a sharp drop from the 2.4% growth seen the quarter before.

The Commerce Department released the data as debates over the federal budget and debt ceiling continue. Rising political tensions, paired with fiscal uncertainty, are adding to investor concerns.

Experts say the U.S. still has time to address its fiscal outlook. But doing so will require bipartisan agreement on taxes, spending, and reforms—something Washington has struggled to achieve in recent years.

Investors will now watch how lawmakers respond. Some analysts warn that more downgrades or market reactions could follow if no action is taken.

Despite the downgrade, the U.S. remains a key player in global finance. Its bonds are still seen as some of the safest in the world. But with rising debt and ongoing political fights, that status may not last forever.