US Loses Last AAA Rating, Moody's Flags Rising Debt

The downgrade to Aa1 from Aaa adds to the bad news for the US president, coming on the same day his flagship spending bill failed to pass a key vote in Congress due to opposition from several Republican fiscal hawks.

Explaining its decision, the ratings agency noted "the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns." 

In its decision, Moody's warned that it expects federal deficits to widen to almost nine percent of economic output by 2035, up from 6.4 percent last year, "driven mainly by increased interest payments on debt, rising entitlement spending, and relatively low revenue generation."

As a result, it expects the federal debt burden to increase to "about" 134 percent of Gross Domestic Product (GDP) by 2035, compared to 98 percent last year.

Moody's decision to downgrade the United States from its top credit rating mirrors similar decisions from the two other major US ratings agencies, S&P and Fitch.