by Martin Armstrong
Armstrong Economics
Moody’s Investor Service downgraded the United States’ credit rating from a top-tier rating of AAA to AA1 due to rising government debt. Fitch Ratings lowered the US debt in August 2023 for the same reason in August 2023, and while Moody’s did not officially act at the time the agency warned that the US was at risk of a downgrade.
The United States has enjoyed AAA status since 1917—this downgrade is a dire warning. At the current trajectory, the $36 trillion+ deficit is expected to advance from 5.4% of GDP in 2024 to around 9% by 2035. Moody’s believes the United States still offers “exceptional credit strengths,” but debt and payment ratios are now “considerably higher than those of similarly rated sovereign entities.” The agency also cited political instability as a concern, as Republicans and Democrats have been unable to align on methods to meaningfully reduce the deficit.