MNI BRIEF: Moody's Cuts U.S. Debt Rating To Aa1 On Deficits

(Corrects to show Moody's was the third, not second rating firm to downgrade U.S. debt) 

 

Moody's Ratings lowered its rating on U.S. government debt to Aa1 from Aaa Friday citing a widening budget deficit and rising interest costs, becoming the last major credit rating firm to no longer deem the world's largest economy a perfect credit. 

 

The move "reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns," Moody's said. S&P downgraded the United States in 2011 while Fitch Ratings did so in 2013.

 

"Successive U.S. administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs. We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration. Over the next decade, we expect larger deficits as entitlement spending rises while government revenue remains broadly flat. In turn, persistent, large fiscal deficits will drive the government's debt and interest burden higher." (See MNI INTERVIEW: Dollar Crash Could Hit Without Warning-Cecchetti)