The Irony Of Moody’s Downgrade Of U.S. Credit
18th May 2025
On Friday, the U.S. lost its last perfect credit rating as Moody’s downgraded it from ‘AAA’ to ‘Aa1,’ citing decades of rising deficits and interest costs. This ends a perfect rating streak held since 1917. Moody’s had warned in 2023 that a downgrade was possible, following similar moves by Fitch in 2023 and S&P in 2011.
The layers of irony behind this downgrade—and its timing—aren’t lost on me.
It’s a farce, really. By the logic Moody’s is now applying, the downgrade should have happened a decade ago, when it became painfully clear that the U.S. had a crippling spending addiction, compounded by a monetary ideology that essentially tried to reverse the fundamental laws of debits and credits.
Yes, it’s bad enough that the U.S. now carries $37 trillion in debt. But what’s worse is that, despite this massive burden, deficits have continued to grow—clear proof that we’ve learned nothing about fiscal restraint. Our refusal to stop putting everything on the national credit card, and our complete disregard for basic math and economic reality, should have triggered multiple downgrades over the past decade.
But the real kicker isn’t just the reckless spending—it’s our full embrace of Modern Monetary Theory, which doesn’t just ignore this irresponsibility but actively encourages it. Yet, somehow, Moody’s didn’t see a problem with monetary policy anytime before Friday.
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Every time Paul Krugman wrote another column or Stephanie Kelton published a new book—and then got a national media platform to promote it—the U.S. deserved a downgrade.