The US was downgraded by Moody’s Ratings on an increase in government debt, a milestone move that casts doubt on the nation’s status as the world’s highest-quality sovereign borrower.
Moody’s lowered the US credit score to Aa1 from Aaa on Friday, joining Fitch Ratings and S&P Global Ratings in grading the world’s biggest economy below the top, triple-A position.
“While we recognise the US’s significant economic and financial strengths, we believe these no longer fully counterbalance the decline in fiscal metrics,” Moody’s wrote in a statement.
President Donald Trump's sweeping tax bill failed to clear a key procedural hurdle on Friday, as hardline Republicans demanding deeper spending cuts blocked the measure in a rare political setback for the leader in Congress.
As written, the bill would add trillions of dollars to the federal government's $36.2 trillion in debt over the next decade.
“The US's fiscal performance is likely to deteriorate relative to its own past and compared to other highly rated sovereigns,” Moody's said.
“Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs.”
The one-notch cut comes more than a year after Moody’s changed its outlook on the US rating to negative.
But the agency has changed its outlook for the US from negative to stable, noting that despite its poor record tackling rising government debt levels, the country “retains exceptional credit strengths such as the size, resilience and dynamism of its economy and the role of the US dollar as global reserve currency”.
