US loses last perfect credit rating amid rising debt

The United States has recently lost its last perfect credit rating, which is a significant development in the world of finance. Moody's, a well-known ratings agency, has expressed concerns about the government's ability to manage its debt effectively. As a result, they have downgraded the US credit rating from 'AAA' to 'Aa1'. This change indicates that the US is no longer viewed as having the highest level of creditworthiness, which means it is not considered to be in excellent financial health. A 'AAA' rating signifies that a country is very reliable when it comes to repaying its debts, and it has held this rating since 1917. However, Moody's has pointed out that successive US administrations have not been able to address the growing deficits and rising interest costs associated with the national debt. In their statement, Moody's highlighted that the downgrade reflects the significant increase in government debt and interest payment ratios over the past decade. These levels are now much higher than those of other countries with similar ratings. The White House has responded to this downgrade by stating that they are focused on addressing the issues that have arisen during President Biden's administration. White House spokesman Kush Desai criticized Moody's, suggesting that if the agency had any credibility, they would have spoken out about the fiscal challenges that have unfolded over the past four years. A lower credit rating can lead to higher borrowing costs for the country and increases the likelihood of defaulting on its sovereign debt. Despite the downgrade, Moody's has acknowledged that the US still possesses exceptional credit strengths, such as its size, resilience, and the ongoing role of the US dollar as the global reserve currency. The agency has projected that federal debt will rise to approximately 134% of the gross domestic product (GDP) by 2035, up from 98% last year. GDP is a measure of all economic activity within a country, including the contributions of businesses, governments, and individuals. The BBC has reached out to the US Department of Treasury for comments regarding this situation. Interestingly, the downgrade coincided with a setback for President Trump's proposed spending plan, which failed to pass the House Budget Committee due to opposition from some Republicans. Additionally, recent figures have shown a decline in government spending while imports have surged as businesses rushed to bring in goods before new tariffs were implemented. The economy contracted at an annual rate of 0. 3%, a sharp decline compared to the previous quarter's growth of 2. 4%, according to the Commerce Department. This combination of events highlights the financial challenges facing the US and raises questions about the future of its economic stability.