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The United States has lost its final triple-A credit rating from Moody's, which downgraded it from Aaa to Aa1, citing increasing levels of government debt as a critical factor. This announcement coincided with the failure of President Donald Trump’s flagship spending bill to pass a crucial vote in Congress, highlighting ongoing fiscal challenges.
Moody's explained that the prolonged rise in government debt and interest payment ratios has placed the US at a disadvantage compared to similarly rated sovereigns. The agency projects federal deficits to escalate to nearly 9% of GDP by 2035, up from 6.4% last year, primarily driven by higher interest payments and entitlement spending. Consequently, federal debt is expected to reach about 134% of GDP by 2035, compared to 98% in the previous year.
Moody's decision echoes similar downgrades from other major ratings agencies, S&P and Fitch, which raised concerns over the US's fiscal management. While Moody's maintained a "stable" outlook, it emphasized a lack of effective measures to reverse the trend of growing annual fiscal deficits.