How America now stacks up with other countries 

For the first time since 1917, the United States no longer has a perfect credit rating. That’s the conclusion of Moody’s, a credit rating agency, which has downgraded America’s sovereign debt from “AAA” to “AA1,” citing ballooning federal debt, rising interest payments, and chronic political dysfunction. That decision ends more than a century of top-tier status.  

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A Century of Triple-A Ends 

Moody’s awarded the U.S. its gold-standard rating during World War I, when the country issued Liberty Bonds to finance the Allied cause. That “AAA” survived the Depression, two global wars, inflation shocks, and the 2008 financial crisis. It held through every downturn, until now. 

Other agencies blinked first. S&P dropped the U.S. to AA+ in 2011, after that year’s brutal debt-ceiling fight. Fitch followed in 2023 when Congress was again paralyzed over raising the debt ceiling. Moody’s was the last holdout. No longer. 

Where America Now Stands 

The downgrade puts the U.S. on par with Austria and Finland, one step below the AAA tier still held by a select few: Germany, Canada, Switzerland, Australia, the Netherlands, and the Nordic nations (Sweden, Norway and Denmark), among others. This rating means the U.S. still has a very strong capacity to meet financial commitments, but it is somewhat more susceptible to long-term risks than AAA-rated countries. 

This move nudges the U.S. closer to countries like France, the U.K., and Belgium, which have long sat a full tier lower. The era of America as the undisputed benchmark for sovereign credit is officially over. 

RELATED: What the U.S. Credit Downgrade Means for Washington, Wall Street, and You 

 Why Moody’s Pulled the Trigger 

The numbers tell the story. U.S. federal debt has topped $36 trillion and shows no sign of slowing down. Interest payments now eat up nearly 20% of all annual federal revenue, a staggering figure for a country that still enjoys relatively low borrowing costs. 

Moody’s pointed to two main problems: First, the absence of any “credible fiscal plan” to slow debt growth. Second, the corrosive effect of repeated debt-ceiling standoffs and short-term budget deals. Investors still trust the U.S. to pay its bills, but Moody’s is warning that the margin for error is narrowing fast. 

Markets have reacted with concern, but not outright panic, and bond yields ticked up, with the 30-year Treasury moving above 5%. Markets largely priced in the downgrade after Fitch moved last year. Moody’s decision brings the final agency in line with its peers. 

The Political Stakes Are Real 

Congress now faces the reality of two downgrades and one final warning. Every extra tenth of a percent in interest adds tens of billions to the federal tab. That is money that cannot go to defense, infrastructure, or tax relief. 

The solution is not complicated. It is also not politically easy. Lawmakers need a bipartisan plan to rein in mandatory spending and address structural gaps in revenue. Anything short of that risks further damage. 

What Comes Next 

Moody’s kept its outlook “stable,” meaning no further downgrades are likely, if current trends hold. But that status depends on action from lawmakers to chart a more stable fiscal path forward. 

The next budget showdown comes this fall. Voters will see whether leaders rise to the moment or punt again. The bond market is watching. So are America’s peers on the AAA. line. 

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